Have you considered ways to protect your home beyond the insurance? Are you worried about your estate planning? Have you considered your options to place your home in a trust or a limited liability company (LLC)? Both can be great options to avoid certain penalties estate tax. Although trusts are much more well known as an estate planning tool, an LLC may be just what you should consider! But what exactly is an LLC?
An LLC is a hybrid business entity that has characteristics of both a corporation and a partnership but not a real company. It is controlled by a single manager or several managers if more than one person is involved in the LLC. One advantage of an LLC is a limited liability which means that in the case of a trial, a creditor could not go after the assets held by the LLC; your personal assets are protected. Another advantage of the LLC is the availability of pass-through income tax; the LLC is only taxed once, at the owners as opposed to the enterprise level.
However, with the advantages there are also disadvantages to be aware of. For example, there is the possibility of self-employment tax. And most often, the houses belonging to an LLC are second homes or vacation or rental properties, so it may not make sense to put your house in an LLC
Forming an LLC is relatively easy. Choose a name that conforms to your state requirements, file the official paperwork called "Articles", pay the filing fee, create an operating agreement and obtain the necessary licenses.
While CLL is generally considered a commercial entity and ineligible to personal insurance, the insurance industry is recognizing the need for an LLC coverage for your home. Some insurance companies offer an endorsement LLC that can be added to your homeowners or personal umbrella policy and provide cover for the house itself, and other structures on the property as a detached garage or fence. It can also provide a personal liability coverage and medical payments to others if the manager of LLC members are responsible for an accident on the property.
Ask your independent insurance agent about protecting your LLC-appointed home with approval LLC. What other ways do you protect your second home or vacation? I would like to hear your ideas in the comments below!
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