Real estate encompasses not only one’s primary residence but also other real estate such as a family farm you share an interest in 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 suggestions about the best form of ownership for each. Nothing below, however, should be considered legal advice for you specifically, and you should meet with a lawyer who preferably is proficient in both real estate and estate planning in your area. The nuances of your situation and priorities deserves particularized advice.
Because your primary residence receives special tax treatment (read about the Georgia homestead exemption), you should carefully consider how your home is owned. Also, unlike in some states, your spouse will not automatically inherit your home if you die. If your intention is for your spouse to be sole owner of your home automatically upon your death, it is necessary to hold title a joint tenants with rights of survivorship or to transfer your property to a living trust which preserves title in the home to the surviving spouse. You could also leave your home to your spouse in a will, but it is important to remember that title to property in an estate cannot be transferred until a will has been probated and gone through a court process. If you have no estate planning at all, there are many situations where your surviving spouse ends up being a co-owner of your residence with your children, which may not be what you want.
If you are single, owning the property in your name allows you to take advantage of tax benefits for primary residences. Transferring ownership to a revocable living trust may also allow you to retain the applicable tax benefits with the added benefit of avoiding the probate process. 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.
If you have questions, ask your closing attorney to ensure that you receive title the appropriate way when you purchase your home, or if you already own your home meet with a knowledgeable estate planning attorney to ensure that you own your home in an advantageous manner.
Vacation Home, Family Farm, or other Family Property
For some families, their family farm or 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 family farm or 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 family farm or 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.
If the family farm or 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.
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.
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 so we can discuss your current and future real estate ventures and the best way to protect them for generations to come. We have a passion at Bryant & O’Connor Law Firm to help clients own their real estate properly and to provide broader estate planning guidance. It would be our pleasure to serve you.