Estate Planning for Real Estate Investors

Reviewed by Turner Henington, attorney, Texas Bar No. 24148206 · Updated October 2026

Real estate investors usually think about liability first, and they should. But the most common problem we see isn’t a tenant lawsuit. It’s a portfolio of properties in the investor’s own name, or in LLCs nobody else can manage, with no plan for who takes over. Henington Lewis Law Firm PLLC helps investors in Austin and Travis, Williamson and Hays Counties structure their holdings so they are protected during life and transfer without court at death.

Trust or LLC? You Usually Need Both

The common structure: rentals sit in LLCs, and your living trust owns the LLCs. Your home goes into the trust directly. You keep liability protection, and nothing needs probate.

Ways to Hold Rental Property in Texas

Things That Trip Investors Up

• Mortgages and due-on-sale clauses. Federal law generally keeps a lender from calling a loan when you move your own home into your revocable trust. Moving a mortgaged rental into an LLC isn’t covered by that protection, so talk with your lender or plan the transfer carefully.
• Title insurance and property insurance. Update the named insured when you move a property into a trust or LLC, and ask your title company about continuing coverage.
• Out-of-state property. A property in another state, held in your own name, can require a separate ancillary probate there. Holding it in your trust or an LLC owned by your trust avoids that.
• Running the LLC like a business. Separate bank accounts, written leases in the LLC’s name and no commingling. Courts can disregard an LLC that is treated as a personal account.
• Who takes over. Your successor trustee or manager needs the leases, property manager contacts, bank access and loan documents. Put them in writing.

Tax Points for Real Estate at Death

• Step-up in basis: Property owned at death generally gets a new cost basis equal to its value at death. That can wipe out the built-in capital gain, including gain deferred through past 1031 exchanges, for your heirs. For community property, both halves are generally stepped up when the first spouse dies.
• Selling vs. holding: Selling a highly appreciated property late in life can trigger tax your heirs would have avoided. Ask about holding, exchanging or gifting strategies before you sell.
• Estate tax: The federal exemption is $15 million per person in 2026, and Texas has no estate tax. Investors with larger portfolios can transfer interests in family LLCs during life, sometimes at a valuation discount, to move future appreciation out of their estates.
• Homestead exemption: Your home keeps its residence homestead exemption in a qualifying trust (Tax Code § 11.13(j)).

Leaving Properties to Your Children

Several children inheriting several properties together is a recipe for disagreement. Your trust can say whether properties are sold or kept, who manages them, whether a child can buy out the others, and how rents are split. You can also leave LLC interests to children in Heritage Trusts so the properties are protected from their divorces and creditors.

Who Will Prepare Your Plan

Turner Henington and Samantha Lewis founded Henington Lewis Law Firm, and one of them works on every plan we write. Turner is a former KPMG tax accountant and a graduate of The University of Texas School of Law. Samantha has nearly a decade of experience in Texas and federal courts and handles estate disputes, so she drafts with an eye to how plans get challenged. Our office is at 1101 S. Capital of Texas Hwy, Bldg G, Suite 150-C, near West Lake Hills, and we also meet by phone and Zoom.

What Our Clients Say

Estate Planning for Real Estate Investors FAQ

Should I put my rental property in a trust or an LLC?

Usually both. The LLC provides liability protection from tenant and property claims, and your revocable living trust owns the LLC interests so the properties pass without probate. A revocable trust alone gives no liability protection.

What is a Series LLC in Texas?

A Series LLC, allowed by Texas Business Organizations Code § 101.601, is one LLC divided into separate series that can each hold different property with separate liabilities. It can be cheaper than many LLCs, but each series must keep separate records and accounts.

Will transferring my rental to an LLC trigger my mortgage’s due-on-sale clause?

It can. Federal law generally protects transfers of your own home into your revocable trust, but not transfers of rental property into an LLC. Talk with your lender or plan the transfer carefully.

Do I need probate for rental property owned in my name?

Usually, yes. Property in your own name passes through probate in Texas, and property in another state may need a separate ancillary probate there. Holding it in a trust, or in an LLC owned by your trust, avoids that.

Can my homestead go in my trust and keep the exemption?

Yes. Texas Tax Code § 11.13(j) allows a residence homestead owned through a qualifying trust to keep the exemption. We draft our trusts to qualify and prepare the deed.

What happens to my LLC rentals if I become incapacitated?

If your trust owns the LLC and the company agreement names a successor manager, your successor can collect rents, pay bills and handle tenants. Without that, your family may need a court guardianship.

Do my heirs pay capital gains tax on inherited rental property?

Generally they receive a stepped-up cost basis equal to the value at your death, so they owe little or no capital gains tax if they sell soon after, even on gain deferred through earlier 1031 exchanges.

Is a lady bird deed enough for rental property?

It avoids probate for that property but provides no liability protection and no plan for incapacity. For investors with several properties, a trust plus LLCs is usually better.

How much does an estate plan for a real estate investor cost?

Every plan is a flat fee, quoted in writing after a free consultation. LLC formation, company agreements and deeds can be included in the quote.

Sources and Texas Law Cited

The legal and tax statements on this page are based on the primary sources below. Laws and figures change, and this page was last reviewed in October 2026. This page is general information, not legal advice for your situation.

• Texas Business Organizations Code § 101.601 – Series LLCs
• Texas Tax Code § 11.13 – Residence homestead exemption (qualifying trusts)
• Texas Comptroller – Residence Homestead Exemption FAQ
• Texas Estates Code ch. 114 – Transfer on death deeds
• 12 U.S.C. § 1701j-3 – Due-on-sale clauses (Garn–St Germain Act)
• 26 U.S.C. § 1014 – Basis of property acquired from a decedent (including § 1014(b)(6) for community property)
• 26 U.S.C. § 1031 – Like-kind exchanges
• IRS Rev. Proc. 2025-32 – 2026 estate, gift and GST exemption ($15 million) and annual exclusion ($19,000)

Keep Reading

• Estate Planning for Business Owners
• Estate Planning for People New to Texas
• Estate Planning for Retirement
• Estate Planning for Multiple Property Owners in Texas
• How to Avoid Probate on Real Estate in Texas
• Transfer-on-Death Deeds vs. Lady Bird Deeds
• Do I Need a Trust If I Own a Home in Texas?
• Austin Estate Planning Attorney
• Estate Planning for Every Stage of Life