How LLCs and Family Limited Partnerships Protect and Transfer Real Estate Wealth

For many high net worth families, real estate is both the engine of their wealth and the most complicated asset to pass on to the next generation.

During a recent Real Estate Industry Update, Daniel Roccanti of James Moore & Company sat down with John Thompson, wealth advisor and owner of Congruent Wealth, to discuss how families can approach real estate wealth transfer with the right structure in place. The conversation focused on practical tools, including LLCs and family limited partnerships, that allow owners to start shifting assets while keeping control.

Why Real Estate Creates Unique Transfer Challenges

Unlike stocks or cash, real estate is illiquid, operational and often tied to years of accumulated depreciation. Families who have built significant portfolios through 1031 exchanges and long-term holds typically carry low cost basis and large unrealized gains, making a simple sale or transfer far more costly than it appears on the surface.

John Thompson described the competing pressures families face: “You have these competing tradeoffs with all of these decisions. You’ve got to look at who’s involved in the real estate, how the next generations want to benefit from the real estate. Do they want to have their inheritance in real estate?”

Add to that the 2026 estate tax exposure, where married couples with estates above $30 million face a 40% tax on amounts over the exemption, and the urgency of having a clear structure becomes real.

Build the Right Structure for Real Estate Wealth Transfer

Daniel Roccanti walked through a tiered entity structure that serves as the foundation for most real estate wealth transfer plans.

Property-Level LLCs

Each property, or a group of similar properties, sits inside its own LLC. This contains liability at the property level, keeps bookkeeping clean and protects ownership from personal risk. In Florida, a husband and wife holding an LLC as partners benefit from meaningful asset protection against personal liability claims.

The Holding Company or Family LLC

Above the property-level LLCs sits a holding company, also known as a family LLC or family limited partnership (FLP). This entity owns the property-level LLCs and becomes the container through which ownership is transferred over time.

Daniel put it plainly: “You got the property LLCs, you got the holding company, and then you kind of have the true owners, which then come down to potentially trusts and things like that or the individual.”

This structure allows parents to bring in family members gradually, gift minority interests over time and take advantage of valuation discounts on those minority stakes. John Thompson noted that with proper appraisals, minority interest and marketability discounts can reach up to 40%, allowing families to move more out of a taxable estate while using less of their unified credit exemption.

Maintain Control While Transferring Ownership

One of the most important design elements of this structure is the separation of economic interest and voting control. Parents can transfer non-voting or minority interests to children or trusts while retaining management authority.

As Daniel explained: “I want to start shifting the economics without giving away the steering wheel.”

Managing member designations, voting and non-voting interests, and operating agreements with clear transfer restrictions all play a role. These documents should also address what happens in the event of an unexpected death, when cash needs to come in and how buy-sell provisions work if a sibling wants out.

Balance Step-Up in Basis with Estate Tax Reduction

A key tension in real estate wealth transfer is the tradeoff between estate tax reduction and preserving the step-up in cost basis at death. Assets moved into irrevocable trusts during the owners’ lifetimes do not receive a step-up, meaning the trust will owe taxes on all accumulated gains if properties are ever sold.

John Thompson offered one approach for families with children who are not interested in staying in real estate: use leverage from the existing portfolio to extract cash, then place that cash into irrevocable trusts where it can be invested differently with its own cost basis. The children who want to stay in real estate receive the properties, potentially with the step-up in basis, while the others receive non-real estate assets through the trusts.

For families who have already used their full unified credit exemption, grantor retained annuity trusts (GRATs) offer another option. The growth of assets placed in a GRAT transfers into the trust outside the estate each year, effectively freezing the taxable value of those holdings.

Common Pitfalls That Can Derail a Plan

Even well-designed plans can fall apart in execution. Daniel and John highlighted several issues they see regularly.

Title not updated: Trusts and holding companies are created but the property titles are never actually transferred. Without updating the title, the legal structure provides no real benefit.

Missed or incomplete valuations: The value of a minority interest in a family LLC is not the same as the underlying property value. Without a proper appraisal that accounts for marketability and minority discounts, families leave significant tax savings on the table.

Overlooked debt: Inherited or gifted real estate often carries existing debt. Understanding how lender relationships, guarantees and loan covenants interact with a transfer is essential before moving any asset.

Portability not elected: When one spouse passes away, the surviving spouse can inherit the deceased spouse’s unused estate tax exemption, but only if an estate tax return (Form 706) is filed and portability is elected on time. Missing this deadline means permanently losing that exemption.

Liquidity shortfall: A large real estate portfolio with little cash creates serious problems when estate taxes, administrative costs and other expenses come due after a death. A liquidity plan, which may include life insurance held inside an irrevocable life insurance trust (ILIT), should be part of any comprehensive strategy.

Watch the Full Conversation

Structuring a real estate wealth transfer is not a one-time event. It is a multi-year process that requires the right team, clear documentation and ongoing review. Daniel Roccanti and John Thompson go deeper on these topics in the full Real Estate Industry Update episode, including how to engage the next generation and build a family governance system that lasts.

Watch the full episode here: Real Estate Generational Wealth Transfer. To connect with a James Moore professional about your real estate planning needs, contact us today.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.