Indirect Ownership

Ownership Type

Features

Pros

Cons

Limited Partnership

• Formed by agreement.

• At least one general partner required, others may be limited partners.

• Because property is owned by limited partnership, no change in deed at death; instead, partnership interests transfer by will or lifetime gift.

• Limited partnership can exist forever.

• Ownership interest may be transferred without deed.

• Offers liability protection to limited partners.

• Spells out agreement between partners–very flexible.

• More complex.

• Annual reporting to IRS and state.

• General partner does not get liability protection.

• May be annual fee to state.

Trust

• Formed by agreement created by donor, naming trustee and one or more beneficiaries.

• Because property is owned by trust, no change in deed at death.

• State law may limit length of existence of trust.

• Trustee manages for benefit of beneficiaries.

• Usually offers liability protection to beneficiaries and trustee.

• Trust instrument spells out duties of trustee and rights and benefits of beneficiaries.

• No annual fee.

• More complex.

• Annual reporting to IRS and state.

• Income held in trust that is not passed out to beneficiaries likely taxed at higher rate.

Limited Liability Company (LLC)

• Formed by agreement.

• Usually consists of member(s) and manager(s).

• Because property is owned by LLC, no change in deed at death; instead, ownership interest usually transfers by will or lifetime gifts.

• Ownership interest may be transferred without deed.

• Offers liability protection to all members.

• Operating agreement spells out agreement between members—very flexible.

• More complex.

• Annual reporting to IRS and state.

• Annual fee to state.