Protecting Your Legacy: Anonymity in Land Ownership
People have different reasons for why they may want their land holdings to remain anonymous. Whether to protect it from creditors, other business ventures, or any other threat, a landowner has a few different options to consider with regards to how they hold title to their real estate. Trusts and series LLCs are the most common ways that landowners can remain anonymous.
Despite the mystique that surrounds trusts, they often are not that complicated and operate somewhat similarly to businesses. Sometimes a trust can be formed as a land trust. The land trust often has a third party as the trustee of the trust that acts on the best interests of the beneficiaries. Another popular trust that also provides anonymity is a revocable trust. The revocable trust also provides the grantor with the ability to retain control over the real estate so it may be a better option for landowners who hesitate to lose control in their lifetime.
For tax purposes, irrevocable trusts often file their own trust tax return while revocable trusts are usually reported on an individual’s personal tax return. If you plan to pass the real estate from generation to generation, then a trust is a great option. But if you own parcels of real estate for investment purposes, you should consider a series LLC.
Series LLCs are not available in every state, but they are available in Illinois, Missouri, and Texas to name a few. In a series LLC, you have one parent LLC with separate branches (“series”) holding different parcels of property. Holding a property in series LLC as opposed to your personal name not only provides a shield of liability between your investments and your personal real estate/personal property, but it can even provide a shield of liability between each of your properties! So long as the series LLC is properly registered and title is held by each separate series, the only assets that are up for grabs are the assets of that particular series! Therefore, it is highly recommended that property investors own real estate in as many series LLCs as possible to mitigate liability.
One of the beauties of the series LLC is that it allows the taxpayer to file one, singular tax return as opposed to a separate tax return for each series. The taxes for the series will either be paid on a Schedule C for a sole owner, a Form 1065 for a Partnership, or a form 1120S for an LLC that elects to be treated as an s-corp (if, hypothetically, the LLC was a c-corp, then they would file Form 1120 for a c-corp tax return).
Business owners can even take a step further and have their LLC owned by a trust. However, this may not be an ideal route for all business owners, so make sure to consult with an attorney to explore which route is best for you.