So you have been privileged to inherit a property from your parents but the catch is you have to co-own it with your sibling. For many, the thought of having to share anything with a sibling is daunting and is something you vowed not to do as soon as you were out of your parent’s house. However now you find yourself as a co-owner, sharing not only the property but the maintenance, management, and liability!
Together you will have to decide if the house is habitable, if it needs upgrading, and if you want to rent it out. If rented out and you as landlords are sued, who is going to pay? You think to yourself, my brother doesn’t have the money to pay so I will be stuck paying any potential creditors or suitors.
Your parents didn’t leave you their home so that you would fight like you were kids. It was their intent to provide you with an income producing property which if managed well, can be a productive investment. Often the best solution is to establish a Limited Liability Company (“LLC”).
An LLC is an estate planning tool which provides asset protection. Simply, the owners of the property will establish an LLC registered with the Secretary of State, will execute an Operating Agreement and Organizational Minutes and the real property will be transferred to the LLC. Property transferred to the LLC is no longer an asset of the owners individually but is now owned by the LLC. So if there is a lawsuit involving the investment property, the LLC is sued and recovery is limited to the assets in the LLC rather than your personal assets.
Establishing an LLC may be the right tool to protect your investment property and maintain an amicable relationship with family as many issues are discussed prior to the establishment of the entity. To discuss establishing a LLC, we invite you to schedule an appointment with our office, and one of our attorneys would be happy to help.