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Private investment from abroad relative
Anonymous7 views5 answers
My brother is not a US citizen and lives in Asia. We want to invest together to buy some investment real estate property. Because he does not have SSN or tax number, the properties bought will be under my name. I will also take care money and property management. Initial contributed money will always belongs to whoever made the contribution, but we will share the profit, appreciation, or loss. What kind of agreement should we have? Someone told me we might need a trust agreement, is it right?
Hire an attorney to draft the correct documents for you. Trust might be an option, but you'd want not to foreclose other ideas that would save you more money Hire counsel
You likely need to form an LLC so that your interests are separate and apart from one another, but you will have to speak with an attorney as to how your brother's interest should be structured using an entity in US or elsewhere.
If you're going to maintain active investment property, you should consider forming a corporate entity (like an LLC) *anyway.* You can structure the entity to allow whatever governing principles you want as far as you and your brother.
The answer depends on your (and your brother's) individual circumstances. For US federal income tax purposes, it is clear that all income from real estate is effectively connected with a US trade or business (and thus taxable).
When deciding on a form of organization, you have to consider whether income will be earned and/or distributed. If the property will earn income, then you may find yourself in the position of paying taxes on that income even if you do not receive it. If this is a considerable amount, you may want/need an organizational form that stops automatic (or presumed) distributions - i.e. a corporation or an LLC with appropriate elections.
Otherwise, a simple partnership agreement may be satisfactory. When making the decision, also remember to consider your brother's immigration status, how often he is in the US, and his risk for being considered a resident alien (and subject to tax on his worldwide taxable income). That would, of course, depend on his particular facts.
I believe the easiest, least costly way to solve your problem is through an Illinois Land Trust. Ownership can be jointly between you and your brother and you will can control the property. You can provide for who would own the property in the event either or both of you die, without having to go through probate.
