Do Not Rely on an LLC to Protect Your Home

I am frequently asked whether placing your home in a limited liability company will protect it from your creditors.  The answer is generally no. 

An LLC will likely be ignored by a court if there is no business purpose for it.  If you own rental property, that can be held in an LLC.  In that situation your clearly have a business purpose.

Contributing your personal assets (like your home, jewelry, furniture, etc.) to an LLC will not likely protect those assets from your creditors.  If you could avoid all of your personal debts by simply contributing your assets to an LLC, everyone would do it!

Other strategies may be available to protect your home from creditors.  States like Florida and Texas have a virtually unlimited homestead exemption.  So called “equity stripping” arrangements (borrowing funds with your home as collateral and then using those funds for other purposes) may be reasonable in some circumstances.

But simply contributing your personal residence to a limited liability company in and of itself will likely offer little protection from your personal creditors.  

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