More Than a Mortgage

The way you choose to title and structure your real estate is just as important as its location, whether it’s a residence, vacation or investment property for you or for your family.

Here are some considerations that can make a difference over the long term:

Protect your privacy

Real property ownership is a matter of public record because of the filings required, typically by the county in which it is located. If you prefer to keep your identity and residence information private, you can purchase real estate through a revocable trust or LLC with a generic name (e.g., “25 Elm Street Trust” or “25 Elm Street LLC”).

Simplify estate administration

Ordinarily, a decedent’s will has to be probated in each state where his or her real property is located. To avoid this potential complication, consider alternatives to purchasing the property outright. Your choices include owning units in an LLC that holds the real estate, or setting yourself up as the trustee of a revocable trust that holds the property. Either option will avoid probate in multiple states and streamline the administration of the estate.

Improve your tax position

If you buy a home for cash, or finance the purchase and take advantage of the standard mortgage interest deduction, consider an alternative: opting for the potential tax benefits of borrowing against the property and using those proceeds for investments.

While there is a cap on the standard mortgage interest deduction, all of the interest paid on money borrowed for taxable investing is generally tax deductible—up to the amount of net investment income you have in a given year. Your accountant can provide details on exactly which investment income qualifies for this deduction.

Possible drawbacks

Before you move forward, it is critical that you consult with your legal and tax advisors to determine whether a particular ownership structure would jeopardize any protections offered under the law. For example, property owned by an LLC or trust may forfeit the:

  • Protections offered by some states (such as Florida’s homestead exemption)
  • Ability to transfer the residence to a qualified personal residence trust (QPRT)
  • $250,000 per individual/$500,000 per married couple exclusion from capital gains tax on the sale of a principal residence

Evaluating your options

There are many privacy, financing and estate planning considerations involved in owning real estate. It is important to understand and evaluate your options to meet your goals and objectives.

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JPMorgan Chase & Co. and its affiliates and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.