Posted in Blog, Estate Planning And Probate, Real Estate Law by

By Jeff B. Skoubye
801.365.1012
[email protected]

Real estate encompasses not only one’s primary residence but also other real estate such as a vacation home or a rental property. The ideal form of ownership varies depending on the type of real estate you own. Below, we take a look at the different types of real estate and offer advice about the best form of ownership for each.

Primary Residence

Because your primary residence receives special tax treatment, you should carefully consider how your home is owned. Ownership by the trust means that the real estate will not go through the public probate process but will instead be handled according to your wishes as specified in the trust document. Transferring your primary residence to a revocable living trust allows you to retain the applicable tax benefits available to primary residences. If asset protection is a major concern during your lifetime, certain types of irrevocable trusts are best suited for your needs but may require you to give up some control of the property.

Vacation Home

For some families, their vacation home has not only high monetary value but also significant emotional value. Ownership of a vacation home by a trust or limited liability company (LLC) can be advantageous because it addresses two main priorities: ease of transfer to the next generation and asset protection.

With a trust or LLC, you are able to establish rules for how the property is to be used and maintained, as well as designate what is to happen to the vacation home once you pass away. This can be a great solution if you want to ensure that the vacation home stays in the family for generations with minimal family conflicts.

An additional benefit of having an LLC own your vacation home is that it provides limited liability from outside claims. If a judgment is entered against the LLC, the creditor is limited to the accounts or property owned by the LLC to satisfy the creditor’s claims and cannot look to your personal accounts or property or those of the other members. Also, if a judgment is entered against you or another member for a claim unrelated to the LLC, it will be harder for a creditor to force a sale of the vacation home. This can be incredibly helpful if you wish to pass the vacation home on to the next generation without worrying about the individual financial situation of each new member.

    Note: In Utah, a single-member LLC (an LLC in which you are the only member) does not enjoy the same protection from your personal creditors. The rationale of the law is that your creditors should be able to seek relief through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by seizure of money and property owned by the LLC.

If the vacation home has been in the family for many years, it is important to consult with us and your tax advisor to make sure that transferring your vacation home to a trust or LLC will not cause an increase in your property taxes or other unintended consequences.

Rental Property

Because rental property is an income stream rather than a residence, asset protection is usually the primary concern. As a landlord and owner of rental property, you face a higher probability of lawsuits arising in connection with the property because the occupants can change over time. Transferring ownership of the rental property to an LLC is a great option. If a renter gets injured on the property, sues the LLC that owns the property, and obtains a judgment that exceeds any property insurance you have, the renter can seek satisfaction of any claims only from the accounts and property owned by the LLC, not from your personal accounts and property or those of any other owners of the LLC.

In addition, ownership by the LLC may protect the rental property from your personal creditors, unless the LLC is a Utah single-member LLC, in which case no creditor protection is available. (see Note above)

Give Us a Call Today!
Whether you are concerned about your primary residence, family cabin, or rental property, we are here to assist you in protecting your valuable property. Given the various considerations for selecting a form of ownership, it is important to have the right advisors helping you along the way. Give us a call and schedule an appointment with Jeff B. Skoubye so we can discuss your current and future real estate ventures and the best way to protect them for generations to come.

jeff-b-skoubye

Jeff B. Skoubye
801.365.1012
[email protected]

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