Placing a rental in an LLC will containerize any property-related liability inside the entity. I proably would not bother doing this until I had 5 or 10 props. Its usually not worth the expense.
NOTHING happens to the house when you die. It will still be owned by the LLC. But ownership of your membership interest in the LLC will change hands–either by will, trust or state law.
You do not have to mention particular assets in your will. You can, but its not necessary. For example, if your will leaves everything to your only child, that will do the trick. If you have multiple beneficiaries of your will, but you want the LLC interest to go to a particular individual, you will want to make a specific gift of the LLC interest.
Beware of a Rookie Mistake. If you leave “the property” to your son, and everything else to your daughter, your son may be surprised to learn that he gets nothing. because YOU didn’t own the property at the time of your death, and the attempted gift “adeems.” The LLC owned the property. and your mambership interest in the LLC would go to your daughter.
I have a house I want to rent and was thinking about transferring ownership from me (I own it free & clear) to an LLC. Can someone point out the advantages of doing this?
One question I have is if I die and I am the only person in the LLC, what happens to the property in the name of the LLC? Does it get distributed according to my will? And, will I need to amend my will to specify what happens to all property in the LLC?
I think you should always have your assets out of your personal name.
If it was me, why not distribute the shares of stock in the LLC to a trust
that owns the shares and your the trustee of the trust. This way if you
die, it doesent matter because it was in benefit of the beneficiaries.
As far as the LLC getting sued and them coming after you
personally…Maybe Maybe not…Depends on the situation… The courts
have to have a pretty good reason to pierce the corporate veil of a
corporation or LLC to come after you and sue you personally. Just
remember when your an LLC or Corporation you always make your
contracts in the name of the LLC or Corporation and you Always sign
after your name as President. Lastly do not comingle funds between
you personally and your LLC. Ive been in court where they tried to
make me liable personally for the actions of the corporation…Lets
just say the judge could not find sufficient evidence to pierce the
corporate veil and sue me personally and take my assets Lastly, why
would anyone hold any assets in your name personally anyway. No
Lawyer is going to sue anybody if they cannot track down assets in
there name. Thats why everything should be in an LLC or S Corp. The
only thing you have to worry about when getting sued personally is if
they get a judgement against you personally. Then your credit will go
to hell and you will have problems getting loans…So Straight From the
Horses Mouth, Been there…Never own anything in your own name
personally and try to never guarantee anything personally. And Lastly
any business entity you do have, only have one primary that deals with
exposure to possible lawsuits and make sure it has no assets. So it
breaks down the corporation doing business has no assets, you have
no assets personally…Why would anybody want to sue you? Just my
thoughts… Mike
What are you trying to accomplish by transferring ownership to the LLC?
I own all of my rental properties in LLCs, for asset protection purposes, and have come to the conclusion that it’s pretty useless for asset protection, unless you’re NOT the managing member of the LLC. Whenever someone sues an LLC, they also sue the managing member, and if they win the suit, all of the managing member’s assets are subject to being picked over by the court (including other LLCs).
Asset protection for rental properties is a tricky beast, and constantly changes. Here’s a good article on asset protection for rental properties, but beware that the best way to protect your assets is to avoid litigation entirely.