I was wondering if you can form a LLC with your spouse and move your primary residence into it? What kind of implacations would one run into? Thanks for any response
no you can’t do this
TMGC,
Why not? What legal authority can you cite that prevents this?
Nothing I am aware of makes this illegal.
First, you need to be careful about mixing business and personal funds, which is against IRS rules and will cause an audit as well as potential loss of protection for your business entity.
Second, if a business buys a property, it’s not a primary residence or homestead and the loan docs will say this. Why are you trying to use business funds and an entity to purchase a primary residence?
- The loans are more expensive.
- homestead laws (at least here in Texas) provide better protection than most entities can.
The IRS allows a second home that can have great tax benefits if that’s what you’re looking for.
Let’s talk about the dis/advantages of this…
So you can depreciate your property and pay recapture when you sell or you could exchange up into your next home. But, can’t you just take the $250k untaxed on your residence? Also, would the cost of a commercial insurance policy plus a homeowner’s policy work out to your advantage?
I’m sure there’s something that makes sense by doing this? But then again, if it made a lot of sense to do this then I think the whole country would be as creative…
give us your thoughts…
DeeinAustin and gsuidiot,
You guys are reading a lot into the question that is not there. You both assume that pnc’s LLC has a business intent; however, pnc never said how his proposed LLC would be used. Furthermore, pnc never said that he planned to “rent” his home from the LLC, nor did he say that he did not already own his primary residence.
You can form a family LLC to hold your personal assets such as bank accounts, investment accounts, even your residence without having a business intent for the LLC.
If the sole intent behind the question is asset protection and estate planning to facilitate wealth transfer and avoid probate, this stategy has merit that pnc should explore with an attorney well versed in estate planning.
pnc should further explore the notion of forming two LLC’s – one for safe assets and one for dangerous assets. Safe assets are those that have no risk of a lawsuit from within. Bank accounts and brokerage accounts are examples of safe assets. Dangerous assets would be business activities and rental property.
Your car is also a dangerous asset. If you are at fault in an accident and your insurance is not adequate to pay the judgement from the enusing lawsuit, you don’t want your car in your LLC with your safe assets. Maybe you don’t want your car in any LLC. Just leave it in your personal name – put everything else you own into LLCs.
Whether pnc really wants the primary residence in an LLC with other safe assets or whether a revocable (A-B) trust is the better title holding vehicle is a question pnc should more thoroughly explore with an estate planning attorney who is well versed in asset protection techniques
The goals pnc should discuss with his professional advisors are capital preservation, asset protection, orderly transfer of wealth, minimizing or eliminating federal estate taxes, retaining ability to step up basis, and avoiding probate. As far as I can tell, a couple of LLCs could fill the bill quite nicely.
I am not an attorney, financial planner, nor CPA, so what do I know? I am just a simple investor, a little past middle age, and exploring solutions to these same issues.
right on the money, Dave.
Well I seemed to have had a lot of resposes to my question and true I did not state what my purpouse was for moving a primary res. to a LLC.
DaveT was correct in guessing what I was thinking. I was wondering if your primary residence could be safe from probate and other legal issues other than a trust and wether it was worth having a family LLC compared to having a trust.
Thanks everyone for the comments. Phil
pnc,
I would consider your residence a semi-dangerous asset. If you put your home into the LLC with other safe assets, a slip and fall lawsuit could take everything held by the LLC.
For this reason, I lean toward the A-B trust as a title holding entity for your primary residence.
Just a point to discuss with your professional advisors.
Thanks Dave
A friend went to the traveling Trump wealth seminar here in Texas recently and said they receommended a combination of LP’s, trusts, and something called a charitable remainder trust for personal asset/probate planning.