What an LLC Does
An LLC creates a legal separation between you and the properties owned through it. When a tenant sues over an injury at a property inside the LLC, the lawsuit stays inside the LLC. A court judgment against the LLC gives the creditor authority to collect from what the LLC owns — not your personal bank accounts, not your home, not assets held outside the LLC.
The LLC protection only works if it is maintained correctly. Commingling personal and LLC funds pierces the corporate veil — the legal protection disappears if a court finds the LLC was not operated as a separate entity. Separate bank accounts, separate records, no personal bills paid from the LLC account.
What an LLC does not do: it does not avoid probate. Your LLC membership interest — your ownership stake — is a personal asset. When you die, it goes through probate the same as any other asset you own in your name.
What a Trust Does
A revocable living trust avoids probate. When your LLC membership interest is assigned to the trust, your successor trustee inherits authority over the LLC at your death — immediately, without a court proceeding. The trust does not protect you from lawsuits during your lifetime. A creditor who wins a judgment against you personally can still go after trust assets in a revocable trust, because you control it and can revoke it at any time.
The trust also covers incapacity. If you become unable to manage the portfolio, your successor trustee steps in without a court-supervised conservatorship. The LLC keeps operating. Rent gets collected. Leases get signed. Repairs get authorized.
For the specific problems that arise when you have an LLC but no trust, see Problems With Using an LLC Without a Trust for Georgia Rental Properties.
What Neither Structure Does Alone
An LLC without a trust assignment leaves the membership interest exposed to probate at death. The LLC itself survives — it is a separate legal entity — but no one has authority to act as a member until the court appoints someone. That takes 9 to 18 months.
A trust without an LLC assignment and deed transfers leaves the assets unprotected from lawsuit liability during your lifetime. A tenant who wins a $500,000 judgment can go after assets you hold in a revocable trust as if they were in your personal name.
How LLC and Trust Work Together
1
Form the LLC
The LLC holds the rental properties and creates the liability wall between the properties and your personal assets. Each property or property group gets its own LLC for clean separation.
2
Create the revocable trust
The trust becomes the owner of your LLC membership interests. It also becomes the owner of any properties held in your personal name via deed transfers.
3
Assign LLC membership interest to the trust
An assignment of membership interest transfers your ownership stake from your personal name to the trust. Without it, the LLC membership interest stays in your name and goes through probate.
4
Transfer personal-name properties by deed
Properties held outside the LLC must be transferred by recorded deed. Each property requires its own deed recorded in the county where it is located.
The result: the LLC provides lawsuit protection during your lifetime. The trust provides probate avoidance at your death. They serve different functions and work together. For full pricing on what this structure costs to build, see the Real Estate Investor Estate Planning Pricing page. For a complete overview, see Estate Planning for Real Estate Investors.
The Common Misconception
Many investors believe that having an LLC means their estate planning is done. It is not. The LLC handles the living-investor liability problem. It does nothing for the dead-investor probate problem. Without a trust and proper assignments, the LLC membership interest freezes in probate — and your family cannot manage the portfolio, collect rent, or sell properties for the duration of the proceeding.
For a full breakdown of the mistakes Georgia investors make when they rely on one structure without the other, see Common Mistakes Georgia Real Estate Investors Make With Estate Planning.
