Property you already own can be moved into an LLC, subject to some limitations and conditions. If you have property that you would like to move into an LLC, consulting with an attorney is a good consideration, but before you do that, here are some things to consider regarding existing debt on a property being transferred to an LLC
Holding property in an LLC is common for farms and ranches in Texas, except where Homestead Exemptions are taken on property containing the family homestead.
If your property has an existing mortgage or note, make sure to look at the “acceleration clause.” Basically, if you have a third party that holds the lien on the property, they may have put in the mortgage or promissory note securing their interest in the property that the entire amount still due on the note would be due in full at the time of any sale or transfer. Usually, this is not an issue for larger banks when their homeowners want to transfer their property into their personal LLC. However, you should absolutely call your mortgage servicer or note holder and ask what their reaction will be—You do not want to find out that the lien holder has exercised their right to accelerate the debt after you have done the transfer.
If there is existing debt on the property and the lien holder does not object to the property being transferred to your LLC, there is a consideration of whether the transfer documents should say that the LLC is taking the property “Subject to” the existing debt or will be “Assuming” the debt. Taking a property “subject to” the existing debt implies that the entity receiving title (your LLC) is making no promises to either the seller or the lien holder to pay the existing debt. This can be a significant consideration from a tax perspective to both the individual doing the transferring as well as the LLC. Assuming the lien means that the LLC will take on the obligation of paying the debt from the seller.
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If you can, paying off the note prior to transfer can speed up and simplify the deeding of the property to the LLC. Attorney Nathaniel Gilbert in San Antonio assists clients in transferring property to their LLCs, or acquiring property in an already existing LLC. If you would like to schedule a consultation with an attorney, Click here.
