Does your real estate portfolio include properties in addition to your primary residence? If so, the type of ownership you have over your real estate can vary depending upon several key factors. Let’s take a look at some different kinds of real estate and discuss what the best kind of ownership for each may be.
Your Primary Residence
Your ownership over your home matters because it received a special tax treatment as your primary residence. In some states, married couples can gain creditor protection through tenancy by the entirety. This can protect either of the spouses from their creditors – except federal tax liens – while keeping important tax benefits intact. Tenancy by the entirety also – and more importantly – permits the automatic transfer of ownership to the surviving spouse when one of them passes away. This happens without involvement of probate court, even if the rest of the deceased’s estate is probated.
Ownership of the primary residence can also be transferred to a joint revocable trust in states that permit it. Because the trust gains ownership of the property, it will not have to endure the lengthy, often costly, and public probate process. Rather, your wishes as laid out in your trust will determine how this property should be treated.
Certain tax benefits are available to individuals who are single and own property in their names. Despite this, transferring ownership to a revocable living trust can allow someone to still gain from those tax benefits while also sparing their loved ones from probate of the real estate. For those who are most concerned with asset protection, an irrevocable trust may be the best option to help you protect your real estate – even if it means relinquishing some control over it.
Additional protections for your primary residence may also be provided in the bankruptcy code, such as a homestead exemption. In some states, however, transferring property to a trust can revoke such exemptions because the trust – not you, the debtor – would be considered as its owner.
Your Vacation Home
A vacation home can represent more than a valuable asset in your estate – it can be an emotional and sentimental piece of property as well. When people want to protect their family’s interest in a vacation home, they may do so by creating a trust or even a limited liability company (LLC). This can allow them to more easily transfer ownership of the property on to the next generation as well as serve as a form of asset protection.
Rules can be established for how the vacation home can be used, how it must be maintained, and what happens to it when you pass away. By making these decisions now, you can help your loved ones keep the property within the family. Family strife can also be mitigated by including your adult children or other relatives as controlling members of the LLC.
When an LLC owns your vacation home, the real estate can be protected if you get sued and a creditor is seeking to claim property you own. Likewise, if your LLC is sued – as may be the case if someone is injured on your vacation home’s property – your personal assets and property may be safe because the plaintiff may only be able to seek compensation from what the LLC owns.
Note: Some states do not provide single-member LLCs with the same kind of protection from creditors. The reasoning behind this is that creditors should be able to seek your LLC interests as compensation to satisfy claims against you. Because there are no other members who would be adversely affected by such a situation, laws have been enacted to this effect in some areas.
If a vacation home has been in your family for a number of years, it’s important to reach out to an attorney who can help you protect it. Legacy Law Centers can help you safeguard your property by placing it in a special trust or LLC. Also, be sure to consult with your tax advisor to understand any tax implications that may arise by doing so.
Your Rental Property
When you own a rental property whose primary purpose is to generate income than serve as a residence for yourself, protecting it as an asset should be your foremost concern. Property owners and landlords are at a higher risk of a lawsuit because of the many occupants they may encounter over time.
By transferring ownership of your rental properties to an LLC, any legal claims a tenant makes must be made against the LLC – not you personally. This means the tenant may not be able to seek your personal assets and property as compensation for a personal injury lawsuit or another kind of hostile legal action against you.
Additionally, LLC ownership can safeguard the rental property from other creditors you may have. Keep in mind, however, that a single-member LLC may not provide the same kind of protections in your state as it does with others. Always be sure to consult with an attorney who can advise you of your options and the risks involved.
Reach out to Us Today for Help!
Legacy Law Centers is here to assist people when they want to protect their homes, a treasured vacation home, or a rental property that provides them with vital income. There are many considerations you should take into account when it comes to protecting your real estate. Our attorneys can explain options that may be available to you and help you achieve your goals for a safer and more certain future.
Reach out to us today for legal support by calling (571) 777-1000 or by completing our online contact form. When you do, be sure to request a consultation to get started as soon as possible.