Create LLC Ryan Braun July 19, 2022
HOUSING OPTIONSCREATE LLC
Parent forms a limited liability company (LLC) to own the property for use by the family member with a disability

Parents can set up a Limited Liability Company (LLC) to own the property (home) for a family member with a disability. This could be a property purchased specifically for the family member with a disability or the current home of the parent(s) and family member with a disability.

Low Risk

Liability Risk

High Risk

Much Control

Day-to-Day Control of Property

Little Control

Much Control

Long-Term Control of Asset

Little Control

Flexible

Flexibility to Move

Limited Flexibility

What is this?

Parents can set up a Limited Liability Company (LLC) to own the property (home) for a family member with a disability. This could be a property purchased specifically for the family member with a disability or the current home of the parent(s) and family member with a disability. 

There are a variety of LLCs that can be set up.  Parent(s) should seek qualified legal and tax counsel to determine which variety of LLC will work best for their situation. In addition to the property (home), the LLC should have sufficient, readily available funds to provide for the upkeep of the home.

LLCs are created by the Founding Member/s.  The parent(s) can act as the Founding Member(s) and can maintain control during their lifetime if they so choose. The Founding Member(s) determines who benefits from the home. The Founding Member(s) maintains control over the LLC. One or more members  (sometimes called Managing Members) manage the company’s day-to-day business and has authority to contract on behalf of the company.  

The LLC should include an Operating Agreement that designates who benefits from the home and funds held by the LLC upon the death of the founder or when the home/funds are no longer needed by the person with the disability. If a Trust has been set up, a Transfer on Death Designation Affidavit can place the LLC into the trust.

Forming an LLC to own the property will allow for the preservation of the property (home) for the benefit of the family member with a disability until the family member with a disability passes away or can no longer live in the property. It will also allow for the protection of the home after the death of the owner. Without a well-written Operating Agreement, any informal agreement about how the property will be used can be ignored, or subject to creditor risks. As families undertake this process, they need to seek qualified legal and tax counsel. 

View a story of a family who has set up an LLC to hold the property:

The Hurst Family

The Molloy Family

What Circumstances Make this a Possible Fit?

    • The parent(s) has sufficient, readily available funds to provide for the upkeep of the home.
    • The parent(s) wants to maintain a measure of control over the property (home) 
    • The parent(s) wishes to transfer the property to other heir(s) if/when the property (home) is no longer in use by a family member with a disability

What Does This Mean to My Family Member with a Disability?

This option provides for continuity of the home for the use of the family member with a disability. An operating agreement can stipulate what will happen with the property if it can no longer meet the needs of the family member with a disability due to deteriorating health or changes in the neighborhood. The family member with a disability must pay fair market rent to the LLC if they are receiving SSI.

What Does this Mean to My Estate?

The parent(s) will and/or the Operating Agreement must clearly address the LLC, or assets in general, to avoid the family member with a disability directly inheriting the LLC. If qualified counsel legal and tax is involved, an LLC is an effective way to easily transfer property for estate planning purposes.

Where Do I Get More Information?

Pros

Cons

Pros and Cons

Extent of Control

Effects on Public Benefits

Longevity

Property Management Responsibility

Financial Considerations

Long Term Flexibility

Tax Issue

Created by a Home Think Tank workgroup. 

Information on this sheet is provided for informational purposes only. Nothing in this document should be considered legal or accounting advice. Contact a professional for information pertinent to your specific situation.

© 2022 Hamilton County Developmental Disabilities Services

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