For many foreign buyers, purchasing U.S. real estate through a U.S. or foreign LLC — or through a foreign corporation — provides significant advantages in estate tax planning (avoiding U.S. situs asset treatment), liability protection from property-related claims, and privacy in states like Wyoming and Delaware. The benefits come with ongoing IRS compliance obligations that must be maintained properly.
For many foreign buyers, purchasing U.S. real estate through a U.S. or foreign limited liability company (LLC) — or through a foreign corporation — provides significant advantages in estate tax planning, liability protection, and privacy.
Estate tax advantage: A non-domiciled foreign national who holds U.S. real property directly is subject to U.S. estate tax on that property at rates up to 40% with only a $60,000 exemption. A foreign national who holds U.S. real property through a foreign corporation does not hold "U.S. situs assets" directly — the foreign corporation shares are not U.S. situs assets — potentially eliminating U.S. estate tax exposure entirely.
Liability protection: Holding real property in an LLC protects the owner from personal liability for claims arising from the property — slip and fall, environmental, and other property-related claims. The LLC's assets can be at risk, but the owner's personal assets outside the LLC are protected.
Privacy: In states that do not require the disclosure of LLC members (such as Wyoming and Delaware), property ownership through an LLC provides a layer of privacy — the property record shows the LLC as owner rather than the individual's name.
Important caveat: The tax benefits of corporate ownership come with compliance obligations — annual returns, transfer pricing documentation, and other IRS requirements. The structure must be maintained properly to preserve its benefits. Foreign buyers should work with a U.S. tax advisor with international expertise before choosing an ownership structure.