20 Oct Estate Planning for Airbnb and Rental Property Owners
Owning rental property can be a great way to build wealth, but with the extra income comes added risk. From liability to taxes to what happens when you’re gone, it’s important to plan ahead so your investment can benefit you and your loved ones. Whether you already have tenants or you’re thinking about jumping into the Airbnb world, it’s important to protect yourself and your assets.
Here’s how smart estate planning can help you safeguard your rental properties, both now and in the future.
Should I Put My Airbnb or Rental Property in a Trust?
In most cases, this is a good idea. Adding your rental properties to a living trust can make things much smoother for your heirs down the line. It keeps these valuable assets out of probate and avoids court delays. Your successor trustee will be able to take over management, transfer ownership to your heirs, or sell the property right away.
For example, say you own a small rental in Scottsdale. If that property is titled only in your name when you pass, your family would have to wait for probate to be completed before they could legally rent, manage, or sell it. However, this court process can take anywhere from nine months to two years! A trust allows your heirs to step right in and keep things running without missing bookings or losing income.
Trusts vs. LLCs: What’s the Better Choice?
Another option is to register your rental as an LLC. Both trusts and LLCs can protect your property, but in very different ways—and the right choice really depends on your goals.
Some property owners even use both. The rental sits inside an LLC for liability protection, and that LLC is then placed in a trust for estate planning. It’s more work up front, but it gives you the best of both worlds.
LLC (Limited Liability Company)
An LLC helps protect your personal assets if someone sues you over something that happens at the rental. For example, if a renter slips by the pool or in the bathtub, the LLC shields your home and personal savings from being pulled into the lawsuit.
That said, LLCs can be more expensive to maintain, and they’re usually better suited for people with multiple rental properties or those who treat rentals as their business.
Revocable Living Trust
A revocable living trust is more about preserving wealth than offering protection. It keeps your property out of probate and makes it easier to transfer ownership to your heirs. You still control the property while you’re alive, and you can change or dissolve the trust at any time.
Irrevocable Trust
With this type of trust, you give up direct control. The trust becomes its own legal entity with its own tax ID. It’s harder to change—but it can offer stronger protection against creditors, lawsuits, or estate taxes.
Spendthrift Trust
If you plan to leave your rental to someone who might not manage it responsibly, a spendthrift trust can help. It allows you to control how and when the property or income is distributed, protecting it from creditors or poor financial decisions.
When to Include a Rental Property in Your Trust
If your rental property is a long-term investment that you plan to pass on, adding it to your trust is a smart move. It simplifies management, avoids probate, and allows your family to keep earning from it without interruption.
But if you’re still growing your portfolio or regularly flipping properties, it may make more sense to start with an LLC. Once your rentals stabilize, you can connect the LLC to your trust for even more security.
Liability and Insurance
Even with a trust or LLC, proper insurance coverage is your first line of defense. Many property owners assume their regular homeowner’s policy covers guest stays—but most often it doesn’t. It’s worth checking with your insurance company before your next booking.
If you’re not covered by homeowner’s insurance, you might also want to look into:
- A landlord or commercial policy for long-term rentals
- Short-term rental insurance for Airbnb or VRBO hosts
- Umbrella liability coverage for broader protection
Estate Planning That Covers Every Property
From your family home to your investment properties, estate planning can help you protect your assets and keep them profitable. At Phelps LaClair, we want to help you preserve the wealth you’ve worked so hard for. We’ll help you build a plan that protects your rental properties, minimizes your risks, and sets your family up for future success.
Contact us today to schedule a free consultation and learn how estate planning can help you protect your assets.
Images used under creative commons license – commercial use (10/15/2025). Photo by chris robert on Unsplash