Ownership, LLC, Land Trust, Tax and Insurance...all rolled into 1

[Ann Madara]

My husband and I own a home that is our residence. We owe less than 30k on our mortgage, we've owned it for 15 years, it is in both our names and has value. 10 years ago his mother deeded her house to only him, individually, for $1. It is in bad shape, 1860 brick, old, cold and mold. This house wasn't salable then, and it isn't now, even though WE are throwing money, blood, sweat and tears into it. Both props are in NJ. 

There has been a recent reassessment of the inherited property that has dropped it in value by 30%, simultaneously doubling the tax rate per 100. Hence, we are now paying 7% on a property that is essentially worthless, an INCREASE of $1800 in our taxes (It's NJ y'all). The city is historic but has no redeeming value, no quality of life, no businesses etc...Out of the 2000 houses in the reassessment, only 1% are valued over 100k, which of course, included his. Other houses that should have been assessed higher and were in better condition, ie had air conditioning, modern bathrooms etc values were dropped by 50% or more are now hitting the market in droves with sales prices over double the assessed values. 

So now here is the bind. We are appealing the assessment, but if that doesn't come through what are his options? 1. House won't go to contract in current condition. 2. Will take a ton more money and time to even bring it close to sale. 3. Not our current residence, so capital gains tax? 4. Walk away? how will that affect his credit? 5. Keep paying the taxes but turn off utilities, drop insurance, board it up and let it rot? 

I want a strategy that will shield our primary home from this secondary useless property. I am researching LLC, Land Trust, etc.

We thought about making that house my principal residence and our current house his principal residence but remaining married and filing income tax jointly? That way we could each sell a house and avoid capital gains?

We are looking into putting it into LLC that will shield us from anything that might occur, default on prop taxes, slip and fall lawsuits etc. Don't understand the insurance portion of going from homeowners to business insurance on a property.

Any ideas of the best way to make this property a non-liability to the more valuable residence, and each of our 800 credit scores? Can't be sold quickly, don't want to pay more out than we have in.