How many times have you scrolled past an Instagram Reel, YouTube Short, or TikTok confidently telling you to transfer your investment property into an LLC for “asset protection?” These content creators love to sell the dream: move the property into an LLC and—poof!—it is magically shielded from tenant lawsuits, credit card debt, divorce, or whatever legal trouble comes your way.
Do not be bamboozled by the shorts. Most of these creators are not attorneys; they are capitalizing on common fears to funnel you into a real estate course or a “consultation” that ends in a sales pitch. So, let’s slow things down and take a real look at what moving real estate into an LLC actually does—and what it doesn’t do. Like most things in life (and certainly in the law), there are pros and cons, and there is no such thing as a perfect, one-size-fits-all solution.
The Dilemma: You (or you and your spouse) own an investment property in your individual names and have been renting it out for years without much thought. Then it hits you: if a tenant sues, they’re not just coming after that property—they could potentially come after any other assets you own in your own name as well. And it is not only tenants who pose a risk. Anyone lawfully on the property can sue. A tenant’s guest slips on a broken stair. A contractor is injured due to unsafe conditions. There is mold. Outdated wiring. A fire hazard you did not even know existed. The list goes on and on.
The Possible Solution: You have heard that forming a two-member LLC and deeding the rental property into it will create a legal barrier between the property and your personal assets, limiting what is exposed in a lawsuit. In theory, the plaintiff can pursue the assets titled in the name of the LLC – but not the rest of what you own personally.
While this has been an exceedingly popular strategy in South Florida, a recent case, S & A Property Investment Services, LLC v. Garcia (Fla. 3d DCA 2023), exposed the hidden risks behind this supposedly “easy” property transfer. As it turns out, nothing in real estate – or the law – is ever quite that easy.
S & A Property Investment Services, LLC v. Garcia (Fla. 3d DCA 2023)
The Owners: The property was owned by Angela and Stephen Anderson, a married couple. In Florida, married couples usually own property as Tenants by the Entireties (TBE). This is a powerful asset protection tool because it treats the couple as one single legal unit. If a creditor sues only one spouse, they generally cannot touch TBE property. It is important to
note that the property was not their primary home (so it did not have the homestead tax benefit).
The “Asset Protection” Trap: The Andersons decided to transfer the property from themselves into an LLC they created (S&A Property Investment Services), where they were the only members. Many property owners do this to protect themselves from personal legal liability if something goes wrong with the property. They assumed that because they were the only two people who owned the LLC, the “true” ownership hadn’t changed.
Before the transfer, the property had a 10% annual cap on property tax increases — meaning the taxable value could only go up by 10% per year unless something happened to reset that rule. This cap is meant to give property owners some predictability in tax bills.
After the couple quitclaimed the property to their own LLC, the local property appraiser reviewed the transfer and decided that it counted as a “change of ownership.” Because of that, the appraiser removed the 10% cap and reassessed the property at its full current market value. The new assessed value was much higher (more than double, based on industry commentary), which meant substantially higher property taxes for the LLC.
The Result: Their property value assessment jumped from $104,023 to $273,409 in a single year – nearly tripling their tax base because they moved the property to an LLC.
The court ruled that:
- A “Person” is not a “Company”: An LLC is a separate legal “person.”
- TBE Protection is Lost: By moving the property from themselves (as a married couple) to the LLC, they traded their “Tenants by the Entireties” protection for LLC protection.
- The Tax “Reset”: Because this was technically a “change of ownership,” the Property Appraiser was allowed to strip away their 10% tax assessment cap.
- The Florida Supreme Court declined to review the decision, so the appellate ruling remains the final word on this case.
Key Takeaways from this Case: Moving a property into your own LLC can be treated like you sold it — for tax purposes — even if you still own the LLC. That can trigger big property tax increases because you lose tax protections tied to continuous ownership. Asset protection is not a form you download or a deed you sign after watching a 60-second video. One wrong move can trigger major tax consequences and undo the very protection you were trying to create. Before transferring property or setting up an LLC, talk to a licensed attorney who
actually practices asset protection and knows how to do it right. A proper consultation now can save you from very expensive lessons later.
Our knowledgeable estate attorneys speak English, Spanish, and Russian. Contact OC Estate and Elder Law at (954) 251-0332 or info@ocestatelawyers.com to get started. Our law firm conducts consultations over the phone or Zoom and facilitates concierge signing of documents right from your home.
