William owned four rental properties in addition to his home. While he owned an umbrella insurance policy for liability protection on the rentals, he was concerned that a tenant or guest would sue him if they had an accident in one of his rentals and that he might lose all his rentals, his home and/or his life savings because of a claim that was not covered by the insurance or exceeded the amount of the insurance.
We advised William to set up a Limited Liability Company (LLC) for each property and transfer each rental into its appropriate LLC. If there was to be an accident, the worst case scenario would be that William would have to liquidate the rental in the appropriate LLC. The other rentals, his home, and his savings would be protected.
The ownership of each LLC was registered in the name of his revocable living trust so that there could be continuing management in the case of incapacity. This would also allow a seamless transfer of the assets to his designated heirs in the event of his untimely death. Without the trust, there would be no ability to properly manage the properties without William, and this lack of management would result in probate and possibly foreclosure proceedings.