Titling a Second or Retirement Home

Second or Retirement Home
Should you use an LLC to own your Second or Retirement Home? How should you title your second or retirement home?

The Alternative: A Cottage LLC Plan.

A good alternative to leaving your children a direct interest in cottage real estate is to create a limited liability company (LLC), a form of business entity similar to a corporation, to own the property. Then, instead of transferring interests in real estate to your children, you can transfer the membership interests in the LLC to them. As a result, your children’s rights and obligations (and those of future owners) are governed by the LLC “operating agreement.” That agreement, a document you draw up, covers scheduling, contributions to expenses, permissible owners, renting, maintenance, and whether the property can be mortgaged. It prevents forced sales but allows for graceful exits. You’ll need an attorney’s help to draw it up, but you and family members can decide on the important matters after discussing them. Your cottage plan doesn’t have to be perfect (and you can change it during your lifetime if you want to). But even a good-enough plan can prevent costly and bitter strife among your descendants. They will thank you for it.

I have been using LLC’s to buy my real estate for years now. Stuart Hollander makes excellent points in this article about using an LLC for your vacation home or second home. The question is, should you use it for your retirement home?

This will depend on your entire estate plan. A plan like this is going to require some planning for a second or retirement home, and I would not attempt this with out a capable attorney.

In general LLC’s are an acceptable method of taking title to real estate and enable you to share interest in the LLC – and indeed change the membership roles as situations change. But do not take setting up a LLC lightly. Although you can do it your self online with the State of Florida at www.sunbiz.org, setting it up correctly will take the expertise of an attorney.

Whether for retirement or a vacation home, I always suggest getting an experienced attorney involved.

Leave a comment below if you want some help with your retirement planning or email me at Gfous@ReirementNEXT.com and I’ll be glad to send you some references.


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