Harry and Wendy are a married couple planning to purchase a residential rental property. Like many of our clients, they want to protect their personal assets from potential claims and liabilities, invest in additional real estate over time, and establish an estate plan that efficiently transfers their wealth to their two children. Their assets include savings accounts, a well-funded investment portfolio of stocks and bonds, and their primary residence.

Owning rental property involves risk. Every tenant, visitor, or contractor who steps onto your property is a potential liability.Without the right structure in place, a single lawsuit could put everything you own at risk. This is exactly the kind of exposure Harry and Wendy want to avoid.

The Solution: A Layered Trust And LLC Structure

Below, we illustrate how we implement a layered trust and business entity structure to protect their assets.

This is a multi-layered asset protection and estate planning strategy that combines privacy, liability protection, and probate avoidance into one cohesive structure. Please don’t hesitate to schedule a consultation appointment, we look forward to building the right structure for you.

Business Applications

Layered trust and entity structures also apply to business owners that want to protect their business assets. In applicable circumstances, a separate and distinct business entity is formed to hold business assets, separate from the operating company that is exposed to more risk. 

Built To Grow With You

Every structure we design is tailored to each client’s specific objectives. This model provides a clear, linear illustration of what is possible. Read on as we build this structure to include transfer of the couple's house into a trust, protection of the couple's investment accounts in an LLC, and legally hiding their assets. This structure builds a strong foundation that can accommodate new acquisitions. Additional strategies are available, including alternative business entities, trusts, and configurations.

• Shield assets from liability 

• Keep the couple’s names out of publicly searchable records

• Create a structure that deters potential claimants from pursuing litigation

• Maintain a well documented, legally defensible entity framework

• Make ownership invisible. Public records searches will reveal real property and business holdings. 

When visible wealth is found, it is effectively an invitation to be sued

• Transfer the couple's house into a trust

• Avoid probate 

The objective is to purchase the rental property with the Florida LLC so that the LLC is named on the deed rather than the couple's names. In advance of the purchase, a step must be taken before forming the Florida LLC. A Wyoming LLC is formed, and a Trust is created that are used in the formation of the Florida LLC. When a Florida LLC is formed, the member manager is publicly listed on Sunbiz.org, Florida’s official business registry. This creates a privacy vulnerability that is avoided by naming the Wyoming LLC as the member manager. The registered agent is listed as the attorney if the client elects to have this service in order to avoid disclosure of personal name(s), information such as an address, and entity that may be linked to the couple. Creditors and their attorneys routinely search Sunbiz.org to identify assets.The members (owners) of a Wyoming LLC are not listed publicly, further, the trust is not recorded publicly, effectively hiding ownership of the asset. This strategy is called entity stacking. 

Why use a Florida LLC to purchase the property: A Florida LLC is used because the property is being utilized as a rental that generates income within the state, which is effectively a business. Real estate is a physical asset governed  by the laws of the state where it sits. The real estate is a tangible asset in Florida, the entity holding the title must be registered or authorized to do business in the state. This is important because you may need to evict a tenant or enforce a lease in Florida. If you form a Wyoming LLC to own a Florida property, Florida law classifies the Wyoming LLC as an out-of-state business that requires registration as a foreign LLC, creating unnecessary complexities. In this example, the Florida LLC is the operating company conducting business, and the Wyoming LLC is the holding company. 

How the asset is protected: A plaintiff's attorney or creditor unrelated to the rental property will see the asset as an opportunity because it shows wealth, these are are called outside liabilities. The Florida LLC protects the rental property from outside liabilities, which are any creditors or claims against the husband or wife personally. Without the LLC to protect the rental property, a car accident plaintiff or creditor could reach the property to satisfy a judgement. If a plaintiff's attorney or creditor can see that the couple owns the rental property they become a more attractive litigation target. 

How liability is contained: By having the Florida LLC own the property directly, claims against the property become claims against the LLC. These are called inside liabilities. The LLC contains the inside liabilities to the extent of equity within LLC. This positions the LLC as the entity that controls the property and any liability arising from the property flows to the LLC, not to the couple personally. Purchasing the rental property with the LLC creates a clear legal barrier between the rental property’s risks and the couple’s personal assets. When additional rental properties are acquired, it is our practice to structure a separate LLC for each individual property to limit cross-liability, prevent a larger pool of assets at risk, and maximize available protections. 

Charging order protection: In Florida, two separate members are required to hold interests in an LLC to achieve charging order protection. A two member Florida LLC can decide not to make any distributions if the operating agreement is drafted correctly. In this example, the Wyoming LLC and the Trust are the two members of the Florida LLC. Charging order protection is addressed in more detail in the The Operating Agreement section below. 

•FL LLC 12345

•Wyoming LLC 1  → member of FL 12345 LLC

•Trust → member of FL 12345 LLC

Key Principle: privacy as protection, by keeping names out of public records limits what potential claimants can see. If a plaintiff’s attorney can’t connect your name to valuable assets, the incentive to pursue litigation drops dramatically.Wyoming is a preferred state for this strategy because:

• Wyoming does not require LLC members to be listed in public filings

• Wyoming LLCs offer strong charging order protections for members

• The state has a well established, and business friendly statutes

• Multiple layers act a deterrent and offer significant privacy 

In this structure, all ownership interests flow to the couple's H & W Trust. The H & W Trust controls all of the entities because it has been assigned the interests from each. The Trust terms are tailored to each client's specific objectives. In this structure the Husband and Wife Trust holds the interest assigned from Wyoming LLC 1 and the Trust used to form the Florida LLC. Wyoming LLC 1 and the Trust each own an interest in the Florida LLC that owns the rental property. The separate entities and multiple layers increases privacy and protections while limiting liability. 

An additional and separate Wyoming LLC 2 is formed for the couple's investment accounts. The accounts would be renamed in that of the LLC . H &W Trust is also named as beneficiary on the accounts. The H & W Trust controls the investment accounts because the interest from Wyoming LLC 2 is assigned to the trust. This strategy achieves privacy and protection. The members (owners) of the Wyoming LLCs are not listed publicly, further, the trust is not recorded publicly, effectively hiding the investment accounts. 

The Couple's primary residence can be added to the H&W Trust. The deed is transferred to the H&W Trust, and the new deed will reflect the trust name. Public records will then reflect the owner of the property to be H & W Trust, not the couple's names.

The Husband and Wife Trust holds the interests assigned from Wyoming LLC 1 and the Trust that together own the Florida LLC. Wyoming LLC 1 and the Trust, together are the listed members of the Florida LLC. The Florida LLC owns the rental property. A separate Wyoming LLC 2 is formed for the couple's investment accounts and the interest is held by the Husband and Wife Trust. The couple's home is deeded to the trust. 

• The couple's names do not appear in any public filing

• H &W Trust → Wyoming LLC 1 → member of Florida LLC 12345  

• H &W Trust → Trust → member of Florida LLC 12345

• Florida LLC 12345 → Rental Property

•Wyoming LLC Investment Accounts → H & W Trust

• House Deed → H & W Trust

A well drafted operating agreement is critical to optimize LLC protection and protecting your ownership interest. Without one, creditors or plaintiffs’ attorneys will often ask the Court to disregard the entity altogether and treat the asset as if the couple owned it personally. This is called 'piercing the veil'. When a Court decides to pierce an entity's veil, it removes the legal protections of the business entity. It treats the entity and the assets it owns as if you owned them personally, creating a larger pool of assets you could lose. This is an outcome we see too often when individuals attempt a do it yourself approach without legal counsel, which is exactly why working with an attorney experienced in asset protection matters. Simply forming an LLC does not protect your asset. Without the critical legal framework, all of your assets are exposed to liability. Therefore it imperative to seek legal guidance to enjoy the many benefit these entities offer. 

The operating agreement governs many aspects of an LLC such as defining ownership, and outlining financial, and structural rules. The agreement outlines distributions and the circumstances under which they are made. A well drafted agreement typically includes strategic clauses such as a non pro rata distribution clause, and, a non mandatory distribution clause (when applicable). If an LLC owner is subject to a charging order, which is a lien on funds that would be distributed by the LLC, these provisions can prevent the creditor from reaching the funds, while still allowing the LLC owner to access LLC funds through alternative methods. In Florida, a two member LLC with a well drafted LLC operating agreement, is not required to make distributions. Further, protective clauses that prevent a claimant from gaining member voting status in an LLC also serve to discourage litigation. There are additional protective clauses available, we have highlighted just a few here to illustrate the depth of this work required to protect what you have built. 

Note: Personal transactions such as paying for a vacation should not be made from the LLC investment accounts or the Florida LLC that owns the rental property. Rather, a proper distribution from the LLC account to the couple's personal checking account is required to preserve the legal protections. The reason for this is that Courts are less likely to uphold the protections of the LLC if the couple were to use the LLC for personal uses and as a personal bank account. It is referred to as 'piercing the veil' as mentioned above. Commingling of funds is common reason a Court will pierce the veil of the business entity. 

Note: Additional steps are required for a DSCR loan (Debt Service Coverage Ratio), Fannnie Mae, and Freddie Mac mortgages. Transferring a property with a conventional mortgage into an LLC is generally permissible without triggering the due-on-sale clause, provided the loan is held by Fannie Mae or Freddie Mac. However, both agencies have specific requirements regarding LLC ownership, seasoning, and operating agreements. Both Fannie Mae and Freddie Mac permit borrowers to transfer a mortgaged property to an LLC without triggering a due-on-sale clause, provided the borrower retains a controlling interest in the LLC. If the bank still holds the mortgage because it was not transferred to Fannie or Freddie then the bank can invoke the due on sale clause. 

Important Notice: These examples are provided for educational purposes only and does not constitute legal advice. Every individual has unique objectives and circumstances that require a tailored approach. We advise you to consult an attorney. Some available provisions, and, alternative solutions have intentionally been omitted, this hypothetical is for demonstrative purposes only. Despite all of these layers and protections, there are circumstances when a Court may allow a judgement that would be satisfied from the LLC or Trust. However, this structure provides a strong  barrier that would require significant legal work and improper actions by the couple for the Court to justify 'piercing the veil' of protections. We advise you to consult an attorney. 

LLC and Corporate Services

We help entrepreneurs build a solid foundation by guiding them through the selection and formation of the right business entity. Whether it is a Limited Liability Company (LLC), or Corporation, these entities shield personal assets and optimize tax benefits. We are experienced in structuring layered operating company and holding company entities to further protect your assets. We guide established companies through complex legal matters, including corporate governance, shareholder agreements, operating agreements, and contract matters. At Deming Law we are experienced in helping lead domestic and international companies by ensuring they are functioning in compliance with state and federal laws. Our comprehensive approach includes advising our clients with their estate and business succession planning.

This option is often used in scenarios when a client already owns a property in their personal name and there is debt on the property. A trust is created and the property is transferred to the trust. The land trust’s name and trustee's name appears on the new deed in the public record. 

In certain cases this may not preserve anonymity. If the property has appreciated in value since the original time of purchase and a transfer is made to a land trust with a trustee that is not the grantor, trustee, or beneficiary it can trigger a tax reassessment to current market value. This would happen if someone else or entity is named as nominee trustee on the deed because the transfer has been made to another party that holds legal title. In some cases a client may wish to remain named as trustee to prevent a significant taxable event. To preserve anonymity, a nominee trustee is required. In many cases, clients have elected to have a nominee trustee to preserve privacy by not having their names listed in public records. At Deming Law, we provide nominee trustee services by having the attorney named if elected by the client. The attorney's name would then appear in the public record and not the couple. Counsel is recommended to evaluate tax consequences in each case.

Why a land trust?  Land trusts as a well established privacy tool. Because the trust’s name appears on the deed rather than an individual’s, a title search or property records search will not reveal the couple as the beneficial owners. Legal counsel is required to evaluate and plan for your unique circumstances. 

• The couple’s names do not appear on the deed, nor the county property records

• The land trust’s name is intentionally generic and non-identifying

• Beneficial ownership remains with the couple through the trust structure

Key privacy benefit: Property records are among the most commonly searched public databases. Creditors, plaintiffs’ attorneys, and data aggregators routinely search county records by owner name. A land trust breaks that chain, a search returns the trust, not the individuals behind it.

A Florida LLC is created to hold the land trust. This positions the LLC as the entity that controls the land trust, and, by extension, the rental property. Any liability arising from the property flows to the LLC, not to the couple personally. The LLC’s formation documents list the Wyoming LLC, rather than the couple’s names as the members.

In this structure, all ownership interests flow to the couple's Trust. The separate entities and layers increase protections and limit liability. For an additional layer of privacy and protection, a Wyoming LLC  and a Trust are created to achieve charging order protection of a  two member Florida LLC. In this structure the Husband and Wife Trust owns the interest in the Wyoming LLC and is interest of the Trust. The Wyoming LLC and the Trust each own an interest in the Florida LLC that holds the land trust, that holds the rental property. 

• FL LLC 12345 →  Land Trust →  Rental Property 

•  H & W Trust → Wyoming LLC 1  → member of FL 12345 LLC

• H & W Trust → Trust → member of FL 12345 LLC

• Wyoming LLC (Investment Accounts) → H & W Trust 

• House→ H & W Trust