Purchasing real estate and managing it is a major responsibility. You want to make sure that you can achieve a return on the investment made and, to the extent possible, you want to protect the investment from creditor claims.
Florida homestead protection laws are some of the broadest in the country, but they only extend to your principal residence. If you are in the market to purchase real estate for investment, you should consider owning that property in a separate limited liability company (LLC).
Whether you want to purchase a house on the beach for family getaways, a piece of property to rent and provide you with an income stream, or a building or office condominium that will be used for your own business purposes, there are many benefits to owning the real estate in an LLC.
Owning real estate in an LLC makes it easy to transfer ownership of the real estate to family members. Traditionally, a deed is necessary to transfer an ownership interest in real estate. However, if real property is owned in an LLC, the owner of the LLC can transfer an interest in the property by transferring membership units of the LLC to a family member or other third party; the person who receives the membership units becomes an owner of the LLC and, thus, an owner of the real property owned by the LLC.
As the owner of an LLC, you have the ability to hand out voting and nonvoting membership units creating a hierarchy of control and management for the property. From an estate planning perspective, you can distribute membership units to family members and thus remove assets from your estate prior to your death.
Protection of Personal Assets
There is an inherent risk of liability when owning a real property. Utilizing a LLC will give you the maximum amount of protection possible to manage that liability. If someone gets hurt on your property, you could be subject to tort claims.
Without an LLC, a tort judgement against you could be satisfied by your personal assets. If the property is owned by an LLC, any claims made against the LLC as a result of an accident at the property can only be satisfied using the assets of the LLC. This protects your personal assets from being subject to a creditor claim. If you own multiple properties, it is prudent to set up a separate LLC for each property as it provides the maximum protection for these assets.
Probate is the legal process that takes place after someone dies – as part of the probate process, the personal representative will marshal your assets and obtain appraisals of any real property. If the real property is owned by an LLC, you can avoid this process by owning your interest in the LLC in a revocable trust.
Titling your property in an LLC creates many options for the owner of the property and can be very beneficial. However, there are additional expenses required to form and maintain the LLC including yearly filing and renewal fees as well as legal fees associated with the preparation of a carefully considered operating agreement. The operating agreement sets forth the management and structure of the LLC and should be created by an experienced attorney.
Every piece of property and the circumstances surrounding it is different. If you are in the market to purchase real estate and want to make sure it is fully protected under Florida law, call your trusted real estate attorneys at Cipparone & Cipparone, P.A. for guidance.Tags: Estate plan, real estate, real estate law