Personal name, LLC or trust: how best to hold title to your California home

Each structure has different consequences for taxes, privacy and inheritance. And changing it after you buy can be very expensive.

It is one of the most important decisions in the process and one that many people make on the fly, at the signing table. Taking title in your personal name, in an LLC or in a trust has very different consequences, and correcting it later is expensive.

In California, changing the ownership of a property can trigger a property-tax reassessment. What looked like an administrative step becomes a permanent increase in the annual cost.

In your personal name

Advantages: it is the simplest and cheapest option. No formation costs and no annual upkeep. Financing is usually easier to obtain and on better terms.

Disadvantages: your name is on the public property record. There is no separation between your personal assets and the risk of the property. And in California, inheritance without planning can go through a long and costly court process.

It usually fits when: it is a family home, your estate is simple and you are not going to rent it out.

In an LLC

Advantages: it separates your personal assets from the risk of the property, which matters above all if you are going to rent. It offers more privacy and makes it easier to have partners or divide ownership interests.

Disadvantages: formation costs and annual upkeep (California charges a minimum annual tax per entity). Financing is more restricted and tends to cost somewhat more. And the tax treatment changes: it has to be reviewed with an accountant.

It usually fits when: it is an investment property, you are going to rent it out or you are buying with partners.

In a trust

Advantages: it avoids probate, sets out the inheritance precisely and offers privacy. It can be combined with the other structures: it is common for an LLC to sit inside a trust.

Disadvantages: it requires careful drafting by an attorney, especially when the beneficiaries live in Mexico. A poorly drafted trust can create more problems than it solves.

It usually fits when: there is estate planning involved or you want the succession settled.

What to review before deciding

• Whether the property is to live in, to rent out or both
• Your tax residence and where you file
• FIRPTA and how it will affect you when you sell
• Who the heirs would be and where they live
• Whether you are buying alone or with partners
• Whether the lender accepts the structure you want to use

The right order

Accountant and attorney first, offer afterward. Not the other way around. The decision on structure has to be made before you sign anything, because it even determines what kind of financing you can apply for.

We work with attorneys and accountants in both countries. See our legal advisory page. If your goal is to rent, the area with the best investment profile in the county is Downtown San Diego.

Before you make an offer, let’s review which structure suits you.