Have you set up a trust and wonder how to hold title to your residence? Have you invested in your first rental property and wondered what would be the best way to hold title? Or have you been investing in real estate for several years and now own several residential rental properties? What would be the best way to title all of those rentals? With this blog post I want to cover with you several aspects of how to hold title to real estate as it relates to your estate planning.
When it comes to your home, the first thing you should consider is filing a homestead. Under current Nevada law, a homestead will protect up to $550,000 of equity in your home. Next, if you have set up a revocable living trust, you should transfer title of the home to the trust. This will allow the home to avoid probate upon your death.
Spouses often hold title to their home in joint tenancy with rights of survivorship. Or sometimes a parent will hold title to their home with a child as joint tenants. It should be noted that joint tenancy does not avoid probate, but rather postpones the probate action until the death of the second joint tenant.
Also, when planning for your real estate, adding a child as a joint tenant as a probate avoidance method has two additional risks. First, you are assuming the order of death. Normally, you as the parent would pass away before your child. However, if the child predeceases you, title to the real estate will simply end up back in your name.
And second, if your child is sued and a judgment is obtained against him, the judgment creditor may be able to attach the judgment lien to your home because your child’s name is on it as one of the owners. Consequently, it is recommended that children are not placed on title to your home as a joint tenant. Rather, place the property in your trust and allow it to pass to your child as a beneficiary of the trust.
Rental Real Estate
Rental properties can be a great investment. However, they also bring with them a potential source of liability. Consequently, it is recommended that rental properties be placed in a limited liability company. An LLC not only shields your assets from liabilities that might arise from within the LLC, but can also protect the property owned by the LLC from your personal creditors.
In addition, if you own more than one rental property, you should consider how to protect each property from the potential liability exposure of the other properties. This can be done, for example, by placing each property into its own LLC. However, given the increasing fees that the State of Nevada charges for each LLC on an annual basis, some people are reluctant to establish a separate LLC for each rental property. This has led many to place more than one rental property into a single LLC. The problem with doing this is simply that you are exposing each property to the potential liability of the other properties within the LLC.
A solution to this problem that should be considered is establishing a Nevada series limited liability company. If set up properly, under Nevada law, each property is placed into a separate series within a single LLC. Each series is then protected from potential liability from every other series within the LLC. Additionally, since the series LLC is one entity for filing purposes, only one annual fee is required to be paid to the
State of Nevada.
Whether you use a series LLC or multiple LLCs, it is recommended that ownership of the LLC be placed into your living trust. Again, this will help avoid probate of the entity upon your death. If you have questions about how a living trust or a series LLC might benefit you and your estate, please contact our office for a free initial consultation.