land trust/LLC/homestead exemption

[illfittingshirt]

I am thinking about converting my primary residence into a land trust and then making the beneficiary an LLC for greater protection. Does anyone know whether my primary residence will still qualify for a homestead exemption if I do this?

IFS

 

[Martha]

Depends on the law of your state. There is a good chance you will screw up your homestead exemption under state law.

Why are you doing this? Depending on your own situation, I generally am inclined to purchase more liability insurance than try to work out convoluted structures for protecting assets from creditors.

 

[illfittingshirt]

I was reading about Land Trusts and making your LLC the beneficiary to shield your primary residence from liability. I work in the medical field and while it is likely my liability coverage at work would handle this, in the event that something is excessive i want to make sure remaining assets are buttoned down. I am of course open to seasoned advice on how to do this. I just don't know.

 

[Martha]

If you have a concern about protecting assets from creditors, than I would talk to a lawyer that has knowledge of that sort of planning--maybe a good estate planner with a bankruptcy lawyer in the same office.

First question is what state do you live in? Are you in a state with a generous homestead exemption? If so, don't mess with a good thing.

Also, I am not sure I understand how the trust/llc would be set up. It is very hard to make these things bullet proof. There has been some states that recently have passed laws to allow "asset protection trusts" which purport to be a way for a person to use a trust that they create to shield the trust assets from creditors. Only a few states allow these sorts of trusts. It is unclear whether these trusts will hold up in bankruptcy. I think they probably will not, at least based on how the current bankruptcy code is written. Historically, the only trusts that could not be attacked in bankruptcy were spendthrift trusts. These are trusts created by someone other than the bankrupt debtor; the debtor is only a beneficiary.

If you have more information about the land trust/llc structure and want to post it, I would be glad to comment, for what it is worth.

 

[lazygood4nothinbum]

somewhat related, accountant uncle wanted to set up llc for the inherited house, in part for liability protection due to my brother's engineering biz. instead, our lawyer put the inherited house not in our name but in the name of the estate. lawyer says that affords us homesteaded protection from creditors in event of any liability issue.