Popular services like Airbnb offer attractive alternatives to hotel stays. Homeowners and vacationers, alike, enjoy the perks associated with “easy” rentals. Do you own a home or other income-generating rental property? Make sure you understand the following asset protection and estate planning considerations:
Protecting Owners from Liability
As with any rental relationship, property ownership comes with risk. So, renters could sue for legal and financial liability if they get hurt while on the premises. The first line of defense is general liability insurance. With sufficient coverage, the insurance company steps in to defend the claim. Any damages beyond that delve into personal liability for the owner, depending on property title.
Does a limited liability company own f the property instead of individual(s)? If so, the individual member(s) of the LLC could seek additional protection if the liability insurance coverage limits fail to cover the total amount of financial liability. Also, note that (in order to receive liability protection through the use of an LLC) requires that the entity be correctly formed and properly managed. If the entity is merely an “alter ego” of the member(s), the court may not uphold the liability protection. This could place the property owner(s) on the hook. To check, consult with an attorney.
Estate Planning Considerations
- Beyond liability in the event of an incident. Decide how an asset will pass from generation to generation.
- Lucrative (like income-generating rental property). If the real estate is tied to an LLC, you enjoy options. Choose to divide up the membership interest of the LLC among multiple beneficiaries. With an income producing asset (like rental property), consider your family’s situation and ultimate goals.
- Therefore, an LLC in estate planning helps because you can gift membership interests during your lifetime without losing control. Or transfer it at the time of your death to beneficiaries. Or hold it by a trust for the benefit of the beneficiaries.
- Thus, determining whether or not to use an LLC for rental property is just one aspect of the overall estate planning process. Let us guide you through your legal options. Make sure yto protect your property by noting distribution wishes. Do not leave this to chance. Contact us today to learn more.
About Skvarna Law Firm in Upland and Glendora, California
A skilled attorney can assist with your estate plan. Contact us today to learn about your options (909) 608-7671. We operate offices in Glendora and Upland, California. We provide legal services for individuals living in San Bernardino, Los Angeles, Orange and Riverside Counties. This includes the cities of Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Montclair, Pomona, La Verne, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma. Visit SkvarnaLaw.com to learn more.
