5 Reasons to Keep Your Rental Property Deed in Your Name Instead of an LLC or Trust

When you transition from homeowner to landlord, you may consider transferring your rental property deed to a Limited Liability Company (LLC) or a trust. While this can provide certain benefits, such as liability protection and estate planning advantages, there are also compelling reasons to keep the deed in your personal name. Here are five reasons why you might want to retain ownership of your rental property deed instead of transferring it to an LLC or trust.

1. Simplicity

Keeping the rental property deed in your name is the simplest option. Transferring the deed to an LLC or trust involves legal paperwork, fees, and potentially complex tax implications. If you prefer to keep things straightforward, retaining the deed in your name may be the best choice.

2. Financing and Refinancing

Many lenders are hesitant to finance properties owned by LLCs or trusts. If you plan to refinance your rental property or take out a home equity loan, keeping the deed in your name can make the process easier and potentially more successful.

3. Tax Implications

Transferring a property deed to an LLC or trust can have significant tax implications. For example, if you sell the property, you may lose the ability to claim the capital gains tax exclusion for primary residences. This could result in a hefty tax bill. Before making any changes, it’s crucial to consult with a tax professional to understand the potential impact.

4. Insurance Issues

Insurance companies often charge higher premiums for properties owned by LLCs or trusts. Additionally, some insurers may not offer coverage at all. Keeping the deed in your name can help ensure you’re able to obtain affordable, comprehensive insurance coverage for your rental property.

5. Personal Use

If you plan to use the property for personal use at times, such as a vacation home, keeping the deed in your name can make this easier. When a property is owned by an LLC or trust, using it for personal purposes can complicate matters and potentially lead to legal and tax issues.

In conclusion, while transferring a rental property deed to an LLC or trust can provide certain benefits, it’s not the best choice for everyone. The decision should be based on your individual circumstances, goals, and risk tolerance. Always consult with a real estate attorney or tax professional before making any major changes to your property ownership structure.