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California Keep rental property in Living Trust vs LLC
We have a family home that we are renting out in San Francisco California. It is currently in our parents Living Trust. I asked our Trust Lawyer if we should move the property into an LLC. This is what he said.
" if transferred to an LLC then upon passing the property is no longer transferred from parent to child but from LLC to child. If transferred from LLC to child then the property would be re-assessed at current value and would not qualify for Prop 13 protection. He recommends to purchase more liability insurance."
I never plan on selling the property. When moving from living trust to an LLC is the property re-assessed before putting in the LLC? House was purchased in the 70's id like to keep the 70's sale price.
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I believe you would owe the taxes REGARDLESS if you sold the house or kept it if it's in the LLC. Maybe there is a legal way around this, I dunno. But a house in SF purchased in the 70's? I'd say the value of keeping the original tax base creams (like in $1000+ per month) any perceived advantage of the LLC.
If you're renting it out, yes increase your liability insurance. Also make sure the policy has something called "wrongful eviction" coverage. It's common for rental policies. Given that SF has crazy tenant protections, I'd add that on. If a future tenant has any semblance of a case against you (even if it's not your fault), you can bet the rent board or court would side with the tenant.