Should I Put My Home Into an LLC To Protect It?

Should I Put My Home Into an LLC To Protect It?

Should I put my home into an LLC to protect it? One of the major concerns people have is, “How do I protect my house from creditors?” And people hear advice about, “You’re buying real estate, and that’s real property. Better put it in an LLC, a limited liability company. That’s just the best thing to do. It protects it.” 

Putting real estate in an LLC

Generally that’s true. When you put an LLC as the owner on the title of real property, if there are liabilities associated with the real property, they look after the owner, which is the LLC and not you personally. Also, if there’s a liability of the LLC, then they look at the assets of the LLC, which will be just the real property and not your personal assets. 

Why it doesn’t work so well with your home

The difficulty is that when it comes to your home, it’s your primary residence, and part of the reason that you have it is because you want the tax benefits. When you transfer title of a primary residence into the name of an LLC, then you lose those tax benefits because those benefits are individual and personal to you. 

The LLC can’t claim mortgage interest deduction or tax expense or your capital gains tax exclusion when you sell the property. So by putting it into an LLC, you lose so many things that it’s just not worth it. And it’s not 100% asset protection because nothing really is 100% asset protection. A homestead exemption is what’s usually used to protect your primary residence from creditors instead. Putting it into an LLC is not a good idea.

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