Should I Put My Primary Residence In An LLC?

David C. Tingstad, Edmonds Lawyer

Because I work so closely with real estate investors who use LLCs for their investment properties, I am frequently asked whether they should put their primary residence in an LLC. Most people are aware that an LLC can provide liability protection for assets and may provide tax benefits. There are substantial downsides, however, associated with transferring your primary home into an LLC.

To begin, you lose your homestead exemption, which, in Washington State, exempts creditor’s rights to obtain the equity in your primary residence up to $140,000. Second, hazard insurance is more difficult to obtain. Third, in the event you have bank financing on the property, you will trigger the due on sale clause in the loan documents, meaning the entire balance of the loan may become immediately due. Investing in real estate is a complicated matter.

If you are using your personal residence for estate planning purposes, a qualified personal residence trust (“QPRT”) may be more effective than transferring your property to a limited liability company.

The lawyers at Beresford Booth have decades of experience representing real estate investors. Please call David Tingstad or the other lawyers in the real estate group at Beresford Booth to discuss how we can help you structure your investments for maximum value.

To learn more about real estate investment and LLCs, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.

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