Realty Land Trust vs LLC Comparison
Benefits of Holding Property in a Real Estate Land Trust
Do you own residential or commercial investment property? Or maybe you’re planning an acquisition or sale. If so, there are tremendous benefits for you when using a real estate trust for title. Many investors are quitting LLCs for title. Along with time and money savings, a real estate trust gives you anonymous ownership in public records. It is the safest way of holding ownership.
A quick comparison (Trusts vs LLC) of the benefits illustrate just how powerful and effective trusts are for bank account and peace of mind!
Reduced Personal Liability
Real Estate Trust: Yes! This is an enormous benefit. Any property held in a real estate trust is legally isolated from your other assets. Therefore, you are generally safe for liabilities attached to the property. You and your other personal assets are shielded, as liability is contained within the real estate land trust as the legal owner.
You can be held personally liable for any and all risk associated with the property. All of your other personal assets are exposed.
Personal liability is limited by the LLC organization. However, the LLC must remain in compliance with state law, secretary of state filings and fees. Any omissions can invalidate your LLC statutory protections.
Real Estate Trust: Yes! With title in different trusts, properties are isolated from you, and from each other.
The property is connected to you personally
LLC - No, sorry.
Multiple properties owned by one LLC are all connected. Otherwise a separate LLC is created and maintained for each property.
Privacy of Ownership
Real Estate Trust: Yes! There is no public record that connects your personal name to the property.
Your name and address are part of the public record whether or not you live in that property.
You are indirectly linked to the property because if in compliance with the Secretary of State, members full name and address is online.
Privacy of Sales Price
Real Estate Trust: Yes! If the purchase is executed within a trust, the purchase price can kept private.
When you personally take title to real property, what you paid is found on the grant deed
When you take title to real property in an LLC, the purchase price is obtained from the grant deed.
Tax Return Privacy
Real Estate Trust: Yes! Only net rental income appears on your personal return, not the property itself.
All income and expense plus the property itself is listed on your personal tax return.
Unless LLC files a partnership or corporation tax return.
Retain Tax Base
Real Estate Trust: Yes! The seller’s tax base may be retained by the trust.
When you take title in your own name, the tax assesor will reassess the value of the property.
Special rules apply to LLC transactions and you may not be able to retain the owner’s tax base.
Exempt from Franchise Tax
Real Estate Trust: Yes! You are exempt from paying franchise tax in California
No, but you are personally exposed.
It must pay $800 franchise tax each year.
Split Gains & Losses
Real Estate Trust: Yes! You allocate them as determined by ownership percentage.
All income and expenses are generally alocated to you personally.
It depends upon the operating agreement
Property Safe from You
Real Estate Trust: Yes! The property is safely and legally isolated from your personal liens and judgments.
Your property is directly connected and at risk from your personal liens and judgments. Creditors may attach and seize your equity.
Individual LLC membership interests are at risk from seizure or levy by tax authorities or creditors.