Owning a rental can be a great investment, but it also comes with liability. If a tenant or guest is injured, many owners assume placing the property in a revocable living trust protects their other assets. Unfortunately, a trust generally does not provide that protection.

A revocable trust is primarily an estate-planning tool. It can help property pass according to your wishes and may avoid probate, but assets owned personally or through your trust could still be exposed if a lawsuit arises.

One structure to discuss with your advisors is having a limited liability company own the rental while your revocable trust owns the membership interest in the LLC. When structured correctly, this may combine the liability benefits of an LLC with the estate-planning benefits of a trust.

The details matter. The LLC operating agreement, deed, company records, mortgage and landlord insurance should all reflect the correct ownership. Simply forming an LLC or creating a trust does not automatically transfer the property.

Protecting what you’ve built requires more than paperwork—it requires making sure every piece of the plan matches.

This information is for general educational purposes only and is not legal, tax or estate-planning advice. Every situation is different. Please consult your own Arizona attorney, tax professional and insurance advisor before changing how a property is owned.