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Posted on July 20, 2022 in asset protection
Your revocable living trust does not provide asset protection like an LLC. So why not place your primary residence in an LLC for asset protection? First, you lose your homestead exemption, which protects your equity up to $605,000. Insurance is more difficult to obtain as well. Also, if you have a mortgage, the transfer to the LLC would trigger the due-on-sale clause. Perhaps most significant reason to not transfer your primary residence into an LLC are the tax issues. When your primary residence is transferred into the LLC, you lose your capital gains deduction. Currently, you can sell your primary residence and avoid paying capital gains taxes on the first $250,000 if your tax-filing status is single, and up to $500,000 if married filing jointly.