We're still at the business dinner where Lars is looking for an opening to ask Nils why he bought last time, for cash. He's satisfied Nils that putting his California place in an LLC isn't a good idea. He's still swimming around in related thoughts, though. An LLC does offer liability protection. Lars has to stop and get it straight how that works each time he explains it. He's not a lawyer, though. It's hard enough to avoid tax mistakes.
He recalls while Nils is off at the bathroom, an unfortunate case he'd heard about at a seminar. A woman in her eighties had a stroke and went to assisted living. Alerted to the benefits of estate planning, her attorney son helped to transfer her residence to a family partnership. She then gave partnership interests to her family, to reduce her taxable estate. As Lars remembers it, the debt on the home didn't go into the partnership but the partnership proceeded to pay it on behalf of the woman. It also made cash distributions to mom to support her, but didn't give money to the other family partners. The courts nullified the gifts of partnership interests to her family, and brought everything back into the taxable estate. The speaker at the seminar had indicated disdain for such poor planning, but Lars has learned that it isn't that easy when dealing with real people and their money. But there is a lesson from this and other cases, as Lars has summed up in his mind to keep it simple: a family partnership or LLC should be run as much as possible as if it's a venture of unrelated people.
Nils comes back to the table and announces "I'm buying tonight." Perfect.