In which scenarios is it beneficial to have your primary residence under an LLC?

In this episode of Coffee with Carl, attorney Carl Zoellner covers how to determine if your primary residence could benefit from an LLC.


Today I wanted to touch on a question that’s been coming up relatively frequently, and that is, should you put your primary residence in an LLC for asset protection? 

Like most business scenarios, there is no hard-line rule or clear-cut answer for this type of situation, so I’ll run through a few points here on where it may be appropriate.

The first thing to consider is, what’s your state’s homestead exemption? We always start with our asset protection offered in the state laws, looking at what is already available to us. If I’m looking at Texas or Florida, they have unlimited homestead protection, and your homestead protection is the amount of equity in your property being protected. 

Let’s say you have a half-a-million-dollar home. You have a $300,000 loan against the property, with the entire loan still outstanding, and you have $200,000 in equity. That $200,000 is protected by your state’s homestead exemption if you have an unlimited homestead. 

Some states, however, have a very low or limited homestead exemption. In a state with a very low or limited homestead exemption, you may consider putting your property in an LLC because–even if the homestead does not apply to a property in an LLC–you’re weighing the risk against, what are my protections, and what are not?

We also take a look at if it makes sense to put your home in a homestead. Normally, we do not put personal assets into business entities. It tends to be business assets that belong there. Before you consider putting your personal property or personal residence into that LLC, you need to understand that you’re accepting some risk by doing so. 

Of course, there are many different arguments you can make, whether it be you’re holding the property for appreciation or really that your personal residence is as much an investment as any of your other properties. I’m willing to say that’s a possibility, but it’s one of those points you need to consider whether it’s more beneficial than detrimental. 

As a reminder, if you have a land trust in place where the beneficiary is an LLC, it’s the same scenario. The only thing the land trust is really changing from that perspective is what an outside party can currently see from a deed filing. Where it would show up if you put it directly in an LLC or would show up as the LLC being the owner of the property. Within a land trust, you would see the name of the land trust and the trustee as the owner of that LLC. 

I’m not usually excited or super comfortable when I see a personal residence in an LLC. Other attorneys are fine with it. I’m just giving you my opinion on this piece. The other thing worth mentioning is, what would I suggest for your personal residence? I like the anonymity portion, so I would still use the land trust. 

I would have a land trust with a nominee trustee to get that anonymity. Then I would have the beneficiary be my living trust so I could pass that asset on without my estate having to go through probate. For me, that’s the more congruent solution that I like. 

As I said, we can weigh the cost and benefit of what’s appropriate for you and your entity structure. This isn’t a one-size-fits-all scenario, and Anderson isn’t a one-size-fits-all firm. However, I wanted to take you all through a couple of those scenarios. 

The Takeaway

The last thing I’ll leave you with is there are many tools out there; however, they’re very specialized and usually for very expensive properties or people who have basically a lot of funds available that they don’t plan on utilizing. 

Please keep in mind that each individual is different, so understanding your priorities and goals is key to making a well-informed decision. 

Please take advantage of all of our free content out there. If you haven’t looked at her videos yet, there are great episodes of Toni talks that you should check out. She joins various professionals that work at Anderson, and they go through and answer your pressing questions. 

Suppose you’d like to speak to someone about your specific investing strategy and how to make sure you’re operating your investments as profitably as possible. In that case, I highly recommend taking advantage of a FREE Strategy Session with one of our Senior Advisors. During your phone consultation, you’ll get custom and personalized structuring for your portfolio to align with your individual goals. 

It’s a $750 value but completely FREE for our readers. You can schedule online or by calling 888.871.8535. 

Until next time, I will catch you on the next episode. Happy investing! 

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