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Updated over 4 years ago,
Legal/Tax structure for rental income paying medical bills
My grandmother is aging and currently in an assisted living facility. In order to cover the cost of her care, my mother has rented out my grandmother’s home. I am trying to help her put the home in the correct entity so she has liability protection yet also minimize taxes. Here are the things to consider
1. My grandmother owns the house free and clear
2. All proceeds from the house will go to her medical expenses, my mother will not keep any herself
3. The house is currently in both my grandmother and mothers name
4. My mother wants to protect her own assets, so I originally recommended an LLC
5. My mother is also a high income earner, and has no real estate of her own to offset taxes
The dilemma - it seems that if the house is held in a single member LLC in my mother's name, she will have to pay taxes on the rent (at a high rate) which cuts into the amount available for medical expenses.
We do not want to keep the house solely in my grandmothers name and risk it getting tied up in probate.
Any recommendations on how to structure this to minimize taxes yet provide adequate liability protection?