Joshua B. Beisker
Using an LLC for Ownership of a Vacation Home
If you own a vacation home in your name individually or will acquire one by purchase or inheritance in the future, it is important to consider the ownership option that works best for you. While there are many ways to own a vacation property, there are numerous benefits of owning a vacation home in the name of a limited liability company (LLC), some of which are set forth below:
The relatively small up-front cost of forming an LLC (along with an annual registration requirement and fee) in order to achieve permanent and unlimited liability protection is difficult to match. Further, such protection is important for vacation homes that may be rented or used by others while your client is not present.
In most states, including New York, the names and addresses of the individual owners of an LLC are not made public. This is one reason that most New York City luxury condominium units or homes in the Hamptons are owned by an LLC and not in the name of individual owners.
Ease of Ownership Transfer
Once the deed to the vacation home is listed in the name of the LLC, the deed does not need to change again until the property is sold to a third party. As long as the vacation home is owned by the LLC, ownership can be transferred confidentially by the assignment of LLC membership interests from a parent to trusts, estates, children, etc., without changing the deed in the name of the LLC and without dealing with the associated filings and fees.
Ancillary Probate Avoidance
The ownership of an LLC membership interest is an intangible asset for probate purposes upon an LLC member’s death, meaning that if the LLC owns a vacation home in a state in which the decedent LLC member was not a resident, ancillary probate proceedings will not have to be commenced in the state where the vacation home is situated.
Income Tax Return
Most LLCs that own a vacation home do not require any type of federal or state income tax return, so when there is no rental activity the LLC member simply deducts the associated real estate taxes on his or her individual income tax return as if he or she owned the property directly.
When it comes time for you to purchase a vacation home, you should meet with your attorney to implement the form of ownership that works best for you.
As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.