Further advice can be obtained by our recommended professionals.
Why should I start here?
The way you hold title has a significant impact on your relationship with your spouse, significant other and your entire family. Holding title as “Husband and Wife” has a significantly different impact on your family than a “Trust” when you die. If you change your mind after you go into contract it can sabotage a purchase and you can lose your earnest money deposit. Having this discussion with your significant other before you go hunting is very important. Example: Let’s pretend you decide you want to exclude your wife from being on title because of a loan issue. To remove her from the purchase agreement while in escrow in some cases is like pulling your wisdom teeth.
Set up your holding company or trust before you make an offer.
If you bid on a foreclosed property and it is succesful, many banks will not allow you to change the name of the entity holding the asset during escrow. Changing the name of the owner of an asset after escrow will cost you a transfer tax. Creating an LLC or corporation in Nevada is fast and easy, so just get it done.
Why is a previous marriage or my marriage status so important?
Your marriage status affects who has title to the property you are purchasing. During the escrow process, the title company will pull up everything about you. This is a significant part of making sure title is clear when you purchase the property. If you are still married to someone else but not living with them, they are entitled to a portion of your property. If you are married to multiple people, this will be discovered. Hiding previous marriages from a current spouse is like sitting on a nuclear warhead. If you don’t want your current spouse to know you were married or already married, do not purchase real estate. Hiding material facts about your financial or marital status has serious consequences.
Make certain you have discussed ownership with your significant other before you start looking.
If you or your significant other has a mixed marriage past, this is an excellent time to discuss who will get your property when you check out. The best method to pass your wealth along with your property is through a living trust. Trusts take time to create and if you elect to move your personal property into the trust at a later date, you will have to pay transfer taxes.
Should I hold title in a trust?
If you have a high net worth, holding property in a trust will save you serious money and dodge all the family drama that will occur when you check out. Since you don’t know when you will be checking out, now would be an excellent time to tackle this task. By purchasing the property via a trust, you will also create a large barrier to frivolous lawsuits. You can consult our professionals if you want further advice or consult your own attorney.
Why is it dangerous to purchase a property for a family member?
Helping a family member purchase a house is a great and noble idea. Unfortunately, 95% of these good intentions end up blowing up and destroying a family. Giving a family member all the authority by holding title while having no responsibility of paying on time is a recipe for disaster. In other words, having them on title while you are responsible for mortgage payments, taxes or HOA expenses will create friction. A more effective method is to have a lease with the option to purchase. This legal structure enables you to enforce prompt payments and provides a method for transferring title if they behave. If you really believe your family member is responsible, then why are you buying them a house? Responsible family members can buy their own houses.
Why is it a really bad idea to buy a house to rent to a family member?
Because we manage hundreds of properties, we will tell you first hand experience what drama occurs when we have to evict a family member for not paying rent or for not taking care of a property. Many amateur investors believe they will get a better tenant by placing a member of their family in a property. Even if your family member is St Mary of The Guadalupe, there will come a time when differences of opinion will occur about what should be repaired or how rent should be collected. Over time, these differences build up to a catastrophic event. If you can’t imagine us throwing your brother in-law out of a house, don’t go down this path.