The day you deed your rental building into an LLC, something changes that no one mentions at the closing table. You no longer own real estate. The company owns the real estate. What you own is a membership interest in the company, and Florida’s LLC act needs exactly one sentence to classify it. “A transferable interest is personal property.”
That sentence is not a technicality. It is a full reclassification of what sits in your estate. The land, the building, the address you can drive past, all of it now belongs to an entity, and your asset is an intangible, the same legal category as a brokerage account or a patent. Plenty of good planning is built on that switch, and we will get to the good part. But first you should see what it quietly breaks, because most people who form an LLC for liability protection never update the estate plan that was written for the asset they used to own.
The deed tools stop working
Florida families lean hard on deed-based planning, and for good reason. A lady bird deed passes your property to your family automatically at death, with no probate and full lifetime control. It is one of the most widely used tools in the state.
Here is the problem. A deed conveys an interest in real property. That is all a deed can do. Once the land belongs to your LLC, you hold no real-property interest for a deed of yours to convey. Sign a lady bird deed for a building your LLC owns and you have signed a document that operates on nothing. The same goes for a life estate deed, or any plan that depends on recording a deed in the county records. The tool did not get weaker. The asset it works on is simply no longer yours. It belongs to the company, and you own the company.
The sharpest version of this is your home. Florida’s constitution protects a homestead “owned by a natural person” from forced sale by most creditors. An LLC is not a natural person. The property tax homestead exemption has the same shape, because the statute requires the person living in the home to hold legal or equitable title, and the resident of an LLC-owned house holds neither. They hold a membership interest in a company. Lose the exemption and you also lose the Save Our Homes cap that keeps assessments from climbing with the market. Florida’s homestead protections are among the strongest in the country, and they die at the LLC’s door. Whatever else goes into an entity, your home should almost never be on the list.
Even for a rental, the transfer itself has costs people skip past, including documentary stamp tax on a mortgaged property and a reset of the assessment cap. We walk through those on the rental property LLC page. This post is about the other half, what happens to the estate plan after the deed is done.
A fresh cautionary tale about property that changed classes
This July, the Kansas Court of Appeals decided a family fight that shows what happens when a plan is fuzzy about what class of property it governs. It is a trust case from another state, no LLC anywhere in it, and it is worth every Florida reader’s five minutes. As the trial judge put it, in a line the appellate court chose to repeat, “This case is an example of money and property dividing a family.”
Max and Janice Hacker, husband and wife, set up mirror revocable trusts in 2018 after Max received a terminal diagnosis, and deeded their real estate into the trusts in undivided halves. Max died in March 2019. His trust told the trustee to hand “all tangible, nonbusiness trust property” to his wife, listing jewelry, clothing, furniture, furnishings, books, pictures, and automobiles as examples, and to pour the remainder into a family trust for the next generations.
Six months later Janice, now the sole trustee, signed a trustee’s deed moving the real estate out of Max’s trust and into her own. Her position, eventually, was that land is tangible property, so the clause gave it to her. The court noted that “Janice did not compensate the Max Hacker Trust for the transfer of this property.” A daughter sued in 2022. The district court threw the case out entirely. And in July 2026 the appellate court reversed, holding that the phrase was ambiguous, because a list running from jewelry to automobiles says nothing about land. In the court’s words, “None of the listed items include or even suggest real property.” The court also held that the family trust “sprang into existence upon Max’s death” even though the trustee never formally opened it, and that the limitations clock had not run, because moving some property out of a trust does not end a beneficiary’s interest while some remains.
Two honest disclosures. This is a Kansas case applying Kansas trust law, so for Florida readers it is a lesson, not authority, and Florida runs its own, very different rules on how long a beneficiary has to sue a trustee. And the decision sent the case back down for trial, so after nearly four years of litigation nothing about who wins has been finally decided. The parties were not clients of this firm, and every case turns on its own facts.
Here is why it belongs in a post about LLCs. The Hacker plan slid into a property-class ambiguity by accident, one phrase that might or might not include real estate, and the ambiguity consumed the family. Deeding a building into an LLC performs a property-class change on purpose. You have deliberately converted real estate into intangible personal property. If your will leaves “my real property” to one child, if your trust was funded by a deed that no longer matches the ownership, if your lady bird deed points at a building the company now owns, you have written the Hacker ambiguity into your own plan, with your own hands.
So what does govern an LLC interest at death?
Two things, and neither is a deed. The default rules of Florida’s LLC act, and your operating agreement.
The defaults are harsher than most owners expect. When a member dies, the heirs do not step into the member’s shoes. They receive the transferable interest, meaning the right to distributions if and when the company makes any, with no vote, no management role, and no general right to inspect the books. A single-member company faces a 90-day clock to install a successor member before dissolution rules kick in. We cover the full machinery in what happens to a business when the owner dies.
The operating agreement can rewrite nearly all of that, and it can do something remarkable that a deed cannot. Florida’s Fourth District Court of Appeal enforced an operating agreement that vested a deceased member’s interest directly in his children, holding that the interest “immediately passed outside of probate to his children upon his death,” which nullified a conflicting attempt to leave it through his will. The agreement in that case happened to be governed by New Jersey law, but the court grounded the principle in its own precedent, and the lesson travels. For an LLC, the operating agreement is the succession document. Florida also has a transfer-on-death registration law for securities, and whether a family LLC interest can use it is untested, so no plan should lean on it.
Now the good news
The same reclassification that breaks deed planning opens doors that real estate can never walk through.
Out-of-state property without a second probate. Real estate is probated where it sits. A Florida resident who dies owning a North Carolina cabin in her own name hands her family a second court proceeding in North Carolina, called an ancillary administration. Put the cabin in an LLC and the asset she owns is an intangible membership interest that sits at her Florida domicile. One estate, one proceeding, or none at all if a trust holds the interest.
The state estate tax play. Massachusetts is the clean example. A Florida resident owes Massachusetts estate tax only on real estate and tangible property physically located there, and the tax reaches estates above $2 million, a threshold ordinary estates sail past once the house, the retirement accounts, and everything else are counted. Intangible property of a nonresident is outside the Massachusetts base. A Cape Cod house held in an LLC is, arguably, no longer Massachusetts real estate in your estate. It is an intangible interest in a company. Now the honest caveats. Massachusetts has never formally blessed this, the position is stronger when the LLC is a real company with records, a purpose, and ideally more than one member, and a state revenue department can challenge an arrangement that exists only on paper. This is a genuine planning opportunity with a genuine risk profile, which is exactly why it should be designed, not downloaded.
Gifting in slices. You cannot deed 1.9 percent of a building to a grandchild every December. You can gift membership interests in exactly that fashion, using the $19,000 annual exclusion for 2026, without touching the county records. Appraisers often value a minority interest below its share of the underlying property, since a buyer would pay less for an interest with no control and no easy resale, though the discount is a matter for a qualified appraisal, not a promise. The tradeoff to weigh is income tax. A gifted interest carries your old basis to the recipient, while an interest kept until death gets the date-of-death basis reset. For appreciated property that reset is often worth more than the gifting.
The trust and LLC combination. The cleanest integration is usually both tools doing their own jobs. The LLC holds the property and provides the liability wall. Your revocable trust holds the membership interest and provides the probate avoidance and succession. The operating agreement is drafted to admit the trustee. Each document is written for the asset that actually exists. We cover the mechanics in can a trust own an LLC.
The plan and the entity have to be drawn together
Every problem in this post has the same root. An entity was formed for one reason, liability or tax or a lender’s requirement, and the estate plan was never redrawn for the new asset. The fix is not complicated, but it is deliberate. The deed into the LLC, the operating agreement, the trust, and the beneficiary provisions get designed as one structure, so that what you own is what your plan disposes of. That is the work we do, on both sides of the line. If your property is already in an LLC, or you are deciding whether it should be, bring the documents to a free 30-minute consult and we will look at what you actually own.
Sources. Florida Revised Limited Liability Company Act, Fla. Stat. §§605.0501, 605.0102(66), 605.0502, 605.0602(7), 605.0603(1), 605.0504, 605.0701(3); Fla. Stat. §689.01 (conveyances of real property); Art. X, §4(a), Fla. Const. and Fla. Stat. §§196.031, 196.041 (homestead); Fla. Stat. §711.501 (TOD security registration definitions); Fla. Stat. §§736.0401, 736.1008 (trust creation; limitations on proceedings against trustees), all retrieved August 18, 2026. In the Matter of the Max Hacker Family Trust, No. 128,971 (Kan. Ct. App. July 24, 2026) (slip opinion, no reporter citation yet; reversed and remanded, still pending). Blechman v. Estate of Blechman, 160 So. 3d 152 (Fla. 4th DCA 2015). Massachusetts figures per M.G.L. c. 65C, §2A and Mass. DOR TIR 24-13, as most recently verified July 11 and August 18, 2026. Quotations are from the courts’ published opinions and the statutes. The parties in the cases discussed were not clients of this firm, and no result is predicted or promised for any reader’s situation.
Related Guides
- Can a trust own an LLC?
- What happens to a business when the owner dies
- Florida lady bird deed guide
- LLC for a Florida rental property
- Florida buy-sell agreements
Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about Florida law, not legal advice, and does not create an attorney-client relationship.