I reviewed the article that you linked to and here are my impressions: The assignment of the beneficial interest to the LLC violates the due on sale clause. The article is correct in that you need not record the transfer to make it effective, and that the lender will not be able to find out about it absent discovery tools in a lawsuit, but that doesn't change the fact that you have violated the due on sale clause. Secondly, your ownership interest in the LLC can always be attached in a law suit against you personally, just as if you owned stock and a judgement were outstanding against you the stock could be attached and sold to satisfy the judgment. I do not agree with the article you posted, and would not use it to insulate yourself from creditors.
An LLC is an efficient legal tool for estate planning purposes and to separate liabilities generated by risky assets as for example investment real estate. On itself, an LLC is not a good asset protection tool. A plaintiff may try to (and there is abundant case law of judges who accepted to) pierce the corporate veil by holding you directly liable by theories such as negligence or gross negligence.
Land Trusts, as LLC's, are proper estate planning tools but will not protect you from potential creditors/lawsuits.
For specific asset protection purposes, you should seek specialist advice with a lawfirm that focuses on this very specific area of the law.
I recommend you to put the sole proprietorship of the LLC in an entity that is specifically designed for asset protection purposes, such as an asset management limited partnership that is filed in a state with strong charging order rules and a legislative history as AZ or NV. This asset managent limited partnership can also hold directly your liquid assets such as bank and brokerage accounts.
If the total net worth you seek to protect is over the 400/500k benchmark, my advice is to consider an exit strategy that alllows to you take your assets out of reach of US courts.
A legitimate, thorough asset protection plan should not cause any issues with your lender.
Douglass Lodmell is the nations #1 Asset Protection attorney and has clients in all 50 states, protecting over $4 Billion in client assets. Answers given by him in this forum do not establish an attorney-client relation. He advises to seek a specialized attorney in the area of your interest for legal representation.
A de jure, adequately capitalized (i.e., insurance) LLC in good standing is a separate legal entity, and absent fraud or other intentional tort done by and through the LLC, California courts will not pierce the corporate veil for mere breach of contract. If an LLC member has a judgment against him/her, the creditor can attach income distributions from the LLC, but not the actual assets owned by the LLC.
BTW, a Trustee of a trust can be the manager of an LLC, and the Trustor who is a member of the LLC can transfer his/her membership interests to the Trust to be held for for the benefit of the Trustor. Unless the trust is an irrevocable spendthrift trust, the Trustor's creditors can still reach the income that the LLC distributes to the Trust.
Richard A. Rodgers, Esq.
SHANE, DiGIUSEPPE & RODGERS LLP
200 N. Westlake Blvd., Ste 201
Westlake Village, CA 91362
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