To LLC or Not to LLC

[Patrick McGowen]

Recently, my wife and I decided that I should retire early (she retired 3 years ago) so that we can travel more and spend time with family. We have roughly half of our assets in stocks and retirement accounts and half in a multi-unit property in Washington, DC (no mortgage). I've always been meaning to transfer the property to an LLC for asset protection, and now since I have time on my hands, I've started the process.

Things came to a screeching halt when I attempted to transfer the title of the property to the LLC. I found out that DC charges taxes for this type of transfer and the bill will be about $30K – I confirmed with a title attorney that there's no way around this. So now I am pausing to understand if it's really worth it to do so.

I understand it’s probably about my tolerance to risk, but what else should I be considering to help me come to a decision that’s right for us?

Here is my short list:

Pros:

1. 1. Asset protection
2. 2. Tax savings
3.     a. Qualified Business Income deduction
4.    b. Total savings uncertain
5. 3. Allows for IRA contribution
6.     a. Only means to do so since we’ve retired early (but we probably have enough)
7.    b. $7K a year

Cons:

1. 1. Title Transfer Tax
2.      a. $30K one-time cost
3. 2. Fees
4.      a. $500/year
5. 3. Admin overhead
6.      a. Quarterly Taxes
7.      b. Biannual Report

Thank you so much for the community's input in advance!

[Basit Siddiqi]

@Patrick McGowen

You are mentioning some tax reasons as being pro's which I don't think are valid in your situation.

You should consult with an attorney and CPA prior to doing this.