The Power of LLCs

There are many uses for a Limited Liability Companies, or LLCs. In California, one of the most common uses for an LLC is to hold rental real estate. If you have at least one rental property, you can benefit from placing that property in an LLC. Doing so can result in all of the following:

Income Tax Savings

LLCs operated by an individual, a married couple, or even a group of individuals can help the owner(s) realize significant income tax savings through deductions for business activities and more control over the flow of income through the LLC.

Asset Protection

If you own a property in your name or through your revocable living trust and a tenant or guest of that property sues you, your personal assets are vulnerable.

Revocable living trusts are not designed for asset protection and are useless for this purpose. When the LLC owns the property instead of you individually, your personal assets are shielded. If you have insurance coverage and are sued for more than your policy limit, then you are personally liable for the difference.

Integration Into Existing Estate Plan

Ownership of an LLC can be structured so that if the owner(s) become incapacitated or deceased their trustee or executor can take control and manage the LLC. In addition, ownership interest in an LLC can be passed to your heirs through your revocable living trust, which prevents your ownership interest from going through probate.

As with all potential estate and tax planning options, you should discuss your particular situation and goals with a qualified estate planning attorney to determine if an LLC is an appropriate choice for you.


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