How buying a home under an LLC protects your wealth and simplifies inheritance

There are a number of reasons for why people consider using a Limited Liability Corporation (LLC) to purchase a property, from protecting personal assets to streamlining estate planning. However, before diving in, homebuyers should first consult the appropriate professionals in estate planning, law, mortgages, and taxes, as the drawbacks may outweigh the benefits.

What is a Limited Liability Corporation (LLC)?

A Limited Liability Corporation (LLC) is a legal entity that separates the owner from the asset(s) that are under its ownership. This can shield the owner from personal responsibility for debts or liabilities. For example, if someone were to get injured on the property only the assets under the LLC would be at risk, not the owners other personal assets.

Advantages and disadvantages of purchasing a property using an LLC

According to Chase bank the advantages of purchasing a property using an LLC include asset protection, tax advantages, privacy, and business flexibility. Others talk about how having property under an LLC can make it easier to transfer property for inheritance purposes.

However, purchasing a property under an LLC can incur increased costs from “higher interest rates, larger down payments, and ongoing maintenance fees.” Additionally, changing ownership to an LLC after purchase can run the risk of the lender activating the “due-on-sale” clauses that is standard in many mortgages, which would mean that your lender could demand full repayment of the loan immediately warns Summit Law Group.

Who may want to consider purchasing property using an LLC?

Because of the added costs that purchasing a property under an LLC incurs, it doesn’t suit all homebuyers. Those who it would be most logical for include real estate investors, business owners, and privacy-conscious buyers points out Chase.

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