In this article we will discuss moving properties owned in your personal name into an entity-—be it a corporation, LLC, partnership or land trust.

So, after considered study, you have planned out an asset protection plan that can also minimize taxes for your situation. Now, how should you move properties you already own into the entity or entities?

This is not difficult or complex at all. You simply deed the properties into the entity that should own it. But there are some issues to consider.

Owners Title Policy

You should have an owners title policy on all the properties you own. This protects your initial investment against problems with the title that may have been missed when you initially purchased the property. Sure, the attorney or title company did a title search, but this policy insures it was done correctly and no problems (other than the listed exceptions) with the title. It is a one time fee and relatively inexpensive.

Most national title insurers that are good will provide coverage under the policy you obtained when you purchased the property, even though you have moved the title into another entity that you also own. However, a company which wanted to could deny the claim if the property were re-titled using a quitclaim deed—in other words, transfer with no warranty of title. Of course, you could pay extra and have the title policy updated to the name of the new entity owner. This is not usually very expensive, but this is additional cost.

An alternative is to transfer the property using a warranty deed.  By doing so, you can always point out to a title company that you have given warranty of title to the entity. Therefore, they are on the hook to assure that the title is as they insured it to you. This discussion would only come up if there was a title problem later and the insurer balked at covering the problem.

In the 27 years I have been investing, I have only had to make a claim twice. But when I did, the payoff was in the tens of thousands of dollars.

Transfer Taxes

Most states have a transfer tax that must be paid when property is transferred. However, most have an exception for transfers done to entities owned by the same person “for estate planning purposes.”

Anything thing that protects your assets is legitimately estate planning. Be prepared to show that you own the entity if you are questioned.

Financing

If you have financing on the property, you are simply deeding the property to the entity ‘subject to’ the existing financing. Here many investors are concerned about the due-on-sale clause. Though these concerns have been voiced to me over the years, I have yet to find someone who has had a loan called for this reason. Could the lender call the loan in this situation? Technically, they could.

If they did, you would first explain to them that it was an entity you owned. If they were hardheaded about it, don’t you think you could deed the property back to yourself? Most states do not have much tolerance for a wrongful foreclosure where the default was cured before the sale.

Most lenders require the borrower to personally be on title to get a residential loan. When questioned about buying a property into an entity owned by the borrower, many lenders even tell the borrower that they don’t care if the property is moved into the entity after the closing.

In the next article we will cover insurance and taxes on the transferred property.