How is your real estate titled? Alternatives to consider

March 30, 2026
Senior Wealth Planner Stacia Kroetz addresses a common question we see clients wrestle with: Should I buy a house with my trust or other assets?
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Real estate ownership isn't just about having a place to call home or an investment for the future. If you are contemplating a real estate purchase, planning for a significant renovation project, or thinking about renting out your summer home, you may want to consider how that property is titled.

If you are thinking of keeping a vacation home or other property in the family for generations to come, it may make sense to utilize an estate planning instrument rather than parsing out fractional interests to your children. Although people frequently hold real estate in their own names, there are many reasons to use another vehicle, such as a limited liability company (LLC) or trust.

Let's delve into why you might want to consider alternative methods of titling your property aside from joint tenancy, tenancy in common, and tenancy by the entirety.

Example scenario: Michael’s estate
 

Consider “Michael,” a well-known author. He has personal assets of $40 million, including a family home in Connecticut worth $4 million and a vacation home in Colorado valued at $2 million. His basis is $2.5 million in the Connecticut property and $1.9 million in the Colorado property. Originally, he owned the homes jointly with his wife, but he has held both in his individual name since her death a few years ago.

 

He recently decided to renovate the top floor of his Connecticut home to create a studio space for his son who is an artist. Michael is also contemplating buying a small home in Florida to escape the cold Northeast winters and to spend more time near his daughter and grandchildren.

 

Since his estate is large enough that it will be taxed at both the state and federal level, Michael is interested in transferring assets out of his estate in a tax-efficient way.

 

In 2026, the federal unified estate and gift tax basic exclusion amount is $15 million, which means an individual can give up to $15 million during life or at death without incurring any federal gift or estate tax. Many states, including Connecticut, impose their own gift and/or estate taxes. Michael may want to consider alternatives to holding his real estate personally for the following reasons.

Privacy

In an age where information is readily accessible online, privacy is a growing concern for many homeowners. Real estate deeds are public records and are easily searchable by anyone with an internet connection, making it much easier to access these records and determine who owns what and who lives where.

State laws vary, but one of the most basic reasons to purchase your home through an LLC or trust is to prevent (or at least inhibit) strangers from determining where you live or what property you own.

Limited liability

Another crucial consideration when titling your assets is liability. Holding real estate in your name exposes your personal assets to potential lawsuits or claims against the property. Transferring your property into an LLC can provide a layer of protection by separating your personal assets from those tied to the property. This shields your personal wealth from risks associated with the property, such as accidents or lawsuits.

Before Michael begins the renovation of his home in Connecticut, he may want to transfer that property into an LLC. Anyone planning to build on new land or undergo a renovation or other significant construction project should consider holding the property in an LLC. This can limit your exposure to liability as it relates to any accidents that may occur.

The same logic applies if you are planning to rent out your vacation home or an apartment building. If you own multiple properties, consider holding them in separate LLCs or creating a series LLC so that one property is not subject to the liabilities of another.

For example, if a construction worker falls down the stairs while working on the renovation project and sues Michael for $10 million, all of Michael’s personal assets would be subject to the lawsuit. However, if Michael had previously transferred his home into an LLC, only the assets within the LLC (the Connecticut property) would be at risk. A simple transfer into an LLC could limit his liability to $4 million, thus protecting $36 million of his personal assets.

It is important to note that limiting liability by using an LLC will only be effective where the formalities are respected (for example, assets cannot be commingled, and property-related expenses must be paid by the LLC, not out of a personal account). Further, you may encounter obstacles, such as the application of real estate transfer taxes or a co-op board withholding approval, but experienced advisors can help you navigate the process.

Estate planning

People who wish to keep a home or vacation property in the family for future generations often transfer interests in such assets to trusts for the benefit of family members.

There are tax efficiencies that can lead to this decision, but it is also easier from a practical standpoint to have one entity hold and administer this type of asset rather than having multiple children (and eventually grandchildren) owning small fractional shares of a family home outright. These transfers take different forms depending on the goals of the client. Some of the most frequently used methods are as follows.

If your goal is simply to ease the burden of transition at your death, you may want to consider a revocable trust, an LLC, or a combination of the two. This option functions best for personal residences, vacation homes, and undeveloped land, and is particularly relevant for people who own homes in multiple states.

Couples often hold their real estate as joint tenants with rights of survivorship, which means that this issue becomes pertinent after the first spouse’s death. By transferring the real estate ownership to a revocable trust or LLC, you can avoid probate and simplify the transfer of the assets to your beneficiaries.

This is particularly advantageous for individuals with property in multiple states, as it can help avoid costly and time-consuming multi-state probate proceedings. In addition, if you use an LLC, you can transfer your interest in the LLC to your revocable trust in order to avoid probate on those assets in your home state as well.

In the earlier example, it may make sense for Michael to transfer the Connecticut property into an LLC prior to the renovation project. He may then transfer his LLC interest, along with his property located in Colorado, into his revocable trust. And if he purchases the Florida property directly through his revocable trust, he will not need to transfer it at all.

This planning will avoid ancillary probate in Colorado and Florida, and the Connecticut property will no longer be subject to probate in Connecticut.

Another common strategy is to transfer real property into a qualified personal residence trust (QPRT). The QPRT creator transfers a residence into the trust for a designated term during which the creator (and the creator’s spouse) may continue to live in the residence. This allows the creator of the trust to reduce the size of their taxable estate while retaining the right to live in the home for a designated period.

Assuming the transferor survives the designated term of the QPRT, she must then begin paying rent if she wants to stay in the home. The rent is an additional tax-free gift to her beneficiaries since no transfer tax is due on the payment of rent. The rent paid is also removed from her estate, further reducing the potential for an estate tax burden.

In Michael’s case, the Colorado property would be best situated for use in a QPRT because the family will continue to use it for the foreseeable future and because the fair market value of the property is not significantly higher than his basis of the property.

The property transferred to a QPRT will not receive a step-up in basis at Michael’s death (whereas there would be a step-up if he died owning the property outright), so it is best to use property with a relatively high basis, or you may end up forgoing a significant tax advantage by using a QPRT.

Michael will use up some of his basic exclusion amount to fund the QPRT with the property, but if the term is relatively long and interest rates are high, the amount he uses will be significantly less than the value of the property.

Assuming he survives the term assigned to the QPRT, the Colorado home will be out of his estate and Michael will begin paying rent to the trust, thereby reducing his taxable estate even further and building up cash in the trust, which can be used for maintenance of the property as needed.

When Michael dies, the Colorado property will remain in trust for the benefit of his children and grandchildren so that they can fulfill his wish for them to continue their annual gatherings and make more memories together.

If your estate is subject to estate tax, transferring property into an LLC and then gifting a minority interest in that LLC to a trust for the benefit of your children can be an effective strategy for reducing your taxable estate.

For example, if Michael transferred the Connecticut home into an LLC and thereafter gifted a 49% interest in the LLC to a trust, the value of that 49% interest for gift tax purposes would be much lower than half the fair market value of the residence. This is because it would not be easy to find a buyer for a minority interest in a private entity holding a family’s residence.

Appraisers assign a discount for non-controlling interests in non-marketable assets. As a result, Michael would effectively be transferring an interest worth $2 million but may only have to use between $1.2 million and $1.4 million of his lifetime exemption amount.

Similar to the QPRT, if Michael plans to remain in the home, he would need to enter into a lease agreement with the entity holding the property.

The bottom line: How is your property titled?

In addition to being thoughtful about future real estate purchases, you may want to evaluate how your current property is titled and whether it makes sense to transfer it to another entity.

Whether by trusts, LLCs, or other alternative titling methods, taking proactive steps to protect your assets and plan for the future can provide peace of mind and security for you and your loved ones.

If you have any questions about alternative real estate holding options, please reach out to the BBH Next Generation Team.

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