Wealthy & Wise: Finding the Best Entity for Your Assets

About the Video

For every asset that you have, there is an entity type that will protect it the best. Cort Christie and Attorney Kurt Harris, discuss the best entities to use for the asset types that you have. Don’t place your assets at risk. Be proactive in setting up the protection you need.

Prefer to read? A full transcript is provided below.

Cort:

Hello and welcome to another edition of Wealthy and Wise. I’m your host, Cort Christie. And today we’re going to be talking about how to hold various assets, what the best way to title them is or register them or even how to do business and what types of structures for businesses are best. And we have an expert here to kind of break through it all. And we’re going to kind of have a discussion as well. I’ll bring up different things and we’re going to see if we can stump the chump today. But we have somebody that I would never call a chump. We have Kurt Harris, our fantastic attorney with the Harris law firm in Las Vegas, Nevada. And Kurt, welcome to the program.

Kurt:

Thank you. It’s super good to be here and be part of the discussion.

Cort:

And I would never call you a chump. Never, never. Sorry. But, you know, so often as I’m talking to clients of NCH or people that know what industry I’m in and what we do, you know, they call they ask questions like, well, how do I hold this? Or What do I do with that? And I’d like to go through some ideas with you on where we put things, and I’m just going to come up with some various things and we’re going to see how this how this rolls today.

Kurt:

Sounds good. Fair enough. As you know, at NCH, we draft a lot of trusts. We get a lot of questions from a lot of customers that want to know what should I put where and what goes where and why, essentially. And they want more information about that. So, we get a lot of questions about that from people.

Cort:

That’s awesome. Well, let’s just jump right into it and I think, you know, the first thing that’s near and dear to everyone is the very home that they’re living in, how to protect it, how to make sure it gets to their kids if something happens to them. What do you do with your personal residence? How do you hold it? How do you title it? You know, what do you recommend?

Kurt:

Well, and I would say with 90% of the people, really their home is their castle. That is the number one asset that we’re talking about. And generally, that’s held in a revocable living trust. We very much recommend that it is your personal residence. You are able to take all the tax deductions if it’s not paid for yet and you don’t have to necessarily lose the ability to protect that in bankruptcy if you needed to. So, we recommend titling that into the Revokable Living Trust. Then you have your heirs designated in the trust and that avoids probate at the time of transfer. Homes are difficult to transfer if they aren’t done previously, so we recommend you get that quit claim deed done, get entitled into the name of the trust and thereafter it’s essentially seamless. After you pass away, your heirs just step into your shoes, and they continue on in the name of the trust. They’re able to sell it out of the trust if they want to. After you’ve gone, or they can hold on to it and rent it out, continue to receive rents. They can do a lot of things. It gives a lot of flexibility. So, the Revokable Living Trust is the way to go with your personal residence.

Cort:

Awesome. So personal residence check. How about a vacation property? Maybe you rent on the side, Airbnb, VRBO, you make some side money on. Let’s talk about that. How would I hold title to that?

Kurt:

A couple of ways to do that and it depends on it. A lot of factors and variables. If we’ve got renters coming in and out of there, you might want to have a limited liability company, the LLC, as we call it, to shield liability. That is your best option there. If it is a vacation home, one that you’re not renting out a whole lot, maybe a land trust or a land trust or a real estate privacy trust might be a better option also for you that shields the ownership, but you don’t get the limited liability protection you would get with an LLC. So, if you are going to be renting it out, you’re probably better off shifting that rental property or the VRBO property or Airbnb or something like that into an LLC. It’s probably the more optimal way to hold it. There are additional expenses with that, though, that you don’t have with a land trust. And so, the land trust, you can avoid some of those expenses and you might be able to avoid an additional small filing with your taxes, which some people might prefer.

Cort:

Yeah, it sounds like a simpler way to go about it. So now we’ve got vacation properties using a land trust or an LLC. If you’re earning income off of it, that seems pretty straightforward. So, let’s  stay down the path of real estate then right now. So how about a real estate client that might come to you? That is one of these real estate flippers. They buy and sell properties. They buy ugly homes. They clean them up, make them pretty, and then they sell them.

Kurt:

I really like the land trust or as we call them, the real estate privacy trust, for that option. You’re able to buy the property into the name of the trust and you’re able to sell the trust when you, after you’ve done with your rehab or you’re able to sell it out of the trust, you can do it either way. But the options there are unlimited as far as how you can pursue holding it in the title or in the name of that trust only. And it is a much quicker, it’s a slicker way of flipping the property and you don’t have some of the added additional expenses of an LLC. You might also qualify for a cheaper mortgage rate because it’s held in a trust and not in a limited liability company. And so, we very much recommend a land trust for that type of a flip.

Cort:

Okay, that makes sense. So then let’s go to the active person that is not flipping homes, but they just want to buy a rental property, you know, keep it for the next 30 years so they can live on its income once the mortgage is paid off. And they’ve got rental income coming in and they’ve got tenants in there, they’ve got kids running around and they’ve got income coming in. What do you recommend for that?

Kurt:

Now it’s a little bit of an option here because the limited liability company provides more protection and will cost you a little bit more. You’re going to pay for that and you might pay for that in, like I said, in the interest rates. And you might pay for that in your annual filings, or you may pay for that here and there, and you may pay for that with an additional filing on your tax return. However, you could avoid some of those expenses by the use of a land trust or a real estate property trust, which shields your ownership, and it can save you a lot of money. And it’s a one and done expense on the real estate privacy trust. So,   you have a couple of options there you can pursue. The limited liability company would give you more asset protection, more protection for your personal assets. But the Real Estate Privacy Trust could be used to shield the ownership so that your tenants don’t know who you are and you can hold the property for a long term. If you have several rental properties now, it’s going to be a lot of expenses with the limited liability company that you could avoid by the use of several trusts that are a single charge when you set those up, rather than the ongoing recurring renewal fees that you have to pay on the limited liability companies.

Cort:

All right, cool. Let’s segue, let’s go into business ownership. I want to start a business and in my business that I want to start, I want to raise a bunch of capital. And it’s my goal someday. I want to be a listed company, a publicly traded company. What do you recommend I should do for that business that I’m going to start.

Kurt:

You know, a couple of ways that you’re able to hold that business. And one might be that you might just put it into your Revocable Living Trust. You could list the stock shares or the membership interests of the business or something like that into your trust. And you can title it there. It’ll bypass probate, it’ll go to your heirs, and they may need to make some changes on the other side. You can also build that into the operating agreement, how it’s to go and how you want to leave it. And so, you have the ability to do an amendment on your operating agreement to say, you know, should something happen to me, I would like my business to be taken over, to be assumed by this person, or I’m going to leave my shares to another person. And so you can accomplish that by way of the operating agreement and also bypass the probate process if you want to. You might be able to set up a trust to hold the shares of the business as well, an independent trust that might have different beneficiaries than your own revocable living trust. And take a little maybe, a little less personal. Maybe I have a business partner I want to leave it to or somebody else that might be different than my family, maybe a little less personal to me. And you might be able to set up your own independent standalone trust to hold the business shares that way as well. So, a lot of options there and I think all are good options.

Cort:

That make sense. That makes sense. How about let’s go into different types of asset classes that people have. So, for instance, cryptocurrencies are really volatile, exciting or even NFTs, very similar. How should I hold those assets and what’s kind of the best place for me to put those?

Kurt:

Certain owners may not want their identity exposed when they hold cryptocurrency. Part of the reason that they hold cryptocurrency is for that very purpose. And so, a trust is a way that they can hold that without disclosing the true owner, by having a trustee act as their intermediary on the, on those transactions. So that might be the best way to hold a cryptocurrency. I don’t know that an LLC would afford that same level of privacy that some people want. Now, here in Nevada, there is a, you can have a lot of privacy with your LLC, but it’s not that way in every state. And so, we would recommend either a trust or an LLC to hold an asset like that.

Cort:

Okay, that makes sense. How about my brokerage account? My bank account? Kind of the same. Yeah, you might have some of our listeners might have a bunch of cash sitting around or they’ve got money in the stock market with a brokerage account somewhere, you know, how should I hold title to that? You know, most people listening, it’s in their name, their bank accounts in their name, their brokerage accounts in their name, is there a better way to hold those assets?

Kurt:

It comes up a lot and there is the quick and easy way is to make sure that your account, your brokerage account, or your bank account has a beneficiary listed on it. Sometimes you have to insist they don’t ask you at the bank. That’s your cheapest, quickest way that you are able to leave that to a beneficiary. The issue or the problem might be that your beneficiary may not know that you’ve listed them as the beneficiary on the bank account because the bank is not going to come looking for them. They’re going to hold the money until somebody shows up. And so you need to let the beneficiary know, you are listed as the beneficiary on these accounts. Either that be your bank account or your brokerage account, that’s one way to avoid, hopefully probate by listing the beneficiary there. And then it’s indirectly going to them just like a life insurance policy would. Also, you list that beneficiary in there directly and that can go directly to them. In the alternative, you can list that on your revocable living trust and list your revocable living trust as the beneficiary for on those accounts. And so that would go to that trust and then it could be distributed to your beneficiaries, however many you happen to have at that point, if you want to list a multitude of beneficiaries.

Cort:

So on a base, again, make sure whoever your beneficiaries are, your kids, your church, whoever is getting your stuff is listed with the bank or the brokerage firm, or better yet, have a revocable living trust so that you can avoid the judges, the Court, all of that, so that your things end up with who you want them to.

Kurt:

Absolutely

Cort:

Awesome. Okay. So, let’s talk about maybe some fun toys. I’m a boater, I love boating and I know my kids like to take out the boat. I know sometimes that I hear loud music and they are adults and they are over 21. So sometimes there’s some beverages out there on the boat also, and I’m a little concerned sometimes about that. How should I title my boat to make sure that if something bad happened, Cort didn’t end up with a lawsuit.

Kurt:

Boats, airplanes, toys, LLC. Okay, definitely. You want to have the maximum protection that a limited liability company affords. You want to hold it in a limited liability company? Just my opinion, but it just seems like there’s just too much liability and too much potential for that suit to be filed against you. And in that instance, I think a limited liability company is the way to go wholeheartedly. You’re going to want to hold it in there and you’re going to want to protect yourself as much as you can and limit your liability as much as you can. There are certain inherent risks that are associated with those types of assets, and you really want to have those. Again, you can have the beneficiary listed in the operating agreement of the LLC if you wish, or you can actually leave the LLC to your revocable living trust. An LLC is an item of personal property, so I’m leaving the LLC just like it is a basket to my trust. And inside of that basket there’s a boat. And so, it’s all kind of going together as one, and I’m able to transfer it via my revocable living trust.

Cort:

That’s great, because we’ve had clients with, you know, airplanes, in fact, who have actually crash landed the airplanes and some people got injured in the process and there was big lawsuits from that. And so, you know, they’re suing the owner of the plane. And in this case, it was the pilot had it in his name. And ultimately, you know, he lost a lot of his personal wealth over that accident. That happened because accidents happen. So that’s something that I think is really important that people think about, you know How do I hold even the vehicles, the toys, the things that I have and anything registered or anything titled is where you want to go to really stop and think about it. And, you know, as you talk about the best way to hold these assets, I think about an umbrella policy that everyone should have, you know, just for these types of things that can occur, you know When you’re not paying attention, you’re driving down the road and somebody pulls out in front of you or maybe you are paying attention. Somebody pulls out in front of you, but you hit them and then pretty soon somebody’s suing you because you hit them. And so, at that point, how did you hold your vehicle? You know, have you thought about that? But let’s segue now into things that people might be sitting on at home, like maybe they have collectibles, maybe have art, maybe you have, I don’t know, maybe have some precious metals that you hung on to. Maybe there’s other collectibles. You have a porcelain doll collection, and I’m sure you have one of those, right, Kurt?

Kurt:

Yes.

Cort:

Or some kind of collectible that maybe you want to make sure, you know, nobody ever takes, goes to your kids. What do you do with that?

Kurt:

There’s a couple of things that come up sometimes with those assets, and it depends on if you have a spouse or not, because sometimes you might have a spouse and you might be involved in a joint trust, a joint revocable trust. And usually those assets aren’t distributed until the death of the second party, but sometimes they’re assets that really, you know, it might be an item that’s to go to a certain child. You don’t necessarily want to wait until the second spouse passes away that I want it to go on my death. At that point, you’d want to make that transfer by way of your will. You would list that in your will, items of personal property, and those could be left or transferred through your executor to your beneficiary. If it’s something that you want to wait until after the death of both of you, if you are in a joint trust or if it’s just you single, you can do that by way of your trust and you can leave that to those parties. Personal property, usually, if it’s important, should be listed individually and have that beneficiary listed individually as well. If you don’t, the presumption by the trustee is that I’m going to aggregate all the property together and I’m going to sell it and then we’ll divide the proceeds or we’ll do some kind of a picking or choosing type of a of a deal where you afterwards, you have the people come and they all choose one. You get the first pick, you get the last pick, and then last pick gets the next pick or something like that where your things are just being divvied up and doled out among your beneficiaries. So, you really want to have those items, personal property listed, like you stated, those collections, coin collections and things like that. You want to make sure that you identify those and have the beneficiary identified, put those into your will or put them into your trust depending upon when you want them to be transferred.

Cort:

Awesome. Well, that’s good. So, I mean, we’ve covered some ground here today. We don’t want to make this program too long. And I appreciate you sharing as much as you have. You know, this is a question I know that you get, I get. And it’s always like, well, what do I do with this and what do I do with that? And how should I hold that and how should I title that? So, I think it’s fantastic. Thank you for sharing your wealth of knowledge, Kurt. It’s good to have you on the program once again.

Kurt:

Thank you so much.

Cort:

Absolutely. And thank you, everyone, for tuning in to another edition of Wealthy and Wise. I’m your host, Cort Christie and if you want to talk to one of our experts at NCH about your assets or your estate or how to hold your real estate investments, please call us. It’s absolutely free. There’s no charge. We’ve got experts that’ll ask you some questions, do some profiling, understand what you’re trying to do, and then they’re going to give you some feedback as to their recommendations for what you should do for yourself. So, thank you once again for tuning in. Have a great day!

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DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.