Eric asks a question that I get fairly regularly about putting a personal residence into an LLC. My answer begins with the tax effect of doing so. There are no income tax results to putting your personal residence into an LLC. However, several states, such as Hawaii, have significant transfer taxes for putting a property into an LLC. Check with your Tax Advisor about your state before you do this.

Next is the question about whether this affects the opportunity to borrow against the home. The answer is - it could. However, you can distribute out the home at any time without income tax consequences in order to refinance. Again, be aware of the transfer tax consequences.

From an asset protection standpoint, it could make sense to do this, depending on the state. Some states, such as Texas and Florida, have great homestead laws that protect your home. An LLC would seem to be an unnecessary complication in these states.

The final answer is - It Depends. Like most tax and asset protection strategies, it depends on your particular facts and circumstances. Be sure to talk to a qualified tax and asset protection strategist before you do anything like this. BTW, you really need to speak to two advisors, a tax advisor and a legal advisor. My current recommendation for the legal help is my co-instructor, Garrett Sutton at www.sutlaw.com.

Warmest regards,

Tom