Method 1 — A Will: The Worst Option for Rental Properties
A will is the default for most Georgians who have “done some planning.” For rental properties, it is the worst method available.
When you die with rental properties titled in your name (or held in an LLC you own personally), the properties must pass through Georgia probate. The executor is appointed by the Probate Court and earns a statutory commission under O.C.G.A. § 53-6-60 — 2.5% of all funds received by the estate plus 2.5% of all funds paid out. On an estate that collects $400,000 from a property sale and distributes the same $400,000 to your children, the executor earns $20,000 before doing anything else. If the property is transferred in kind (deed to your children without selling), the court may separately award up to 3% of the appraised value for that delivery.
The process takes 12–18 months for a straightforward rental property estate. During that period, the executor manages the properties subject to their fiduciary obligations — and earns commissions on every rent check that comes in and every maintenance payment that goes out.
A will also gives you no control over when your children receive the properties. Everything distributes at the close of probate — to a 22-year-old and a 35-year-old on the same day, with the same terms.
Method 2 — Outright Lifetime Gift: The Step-Up Basis Trap
Many investors consider gifting rental properties to their children while they are alive — to sidestep probate, simplify the transfer, or reduce their taxable estate. The logic seems sound. The tax consequence is not.
Under IRC § 1015(a), a lifetime gift of appreciated property transfers the donor’s carryover basis to the recipient. The recipient does not get a new basis equal to the current value. They inherit the original purchase price — and all the accumulated gain that comes with it.
A property purchased for $200,000 and now worth $600,000 carries $400,000 of embedded taxable gain. Gift it today and your child inherits that $400,000 gain — they will owe capital gains tax on it when they sell. At a 20% federal rate plus 3.8% net investment income tax, that is $95,200 in avoidable federal tax.
The same property left in your estate — or held in your revocable trust — receives a stepped-up basis under IRC § 1014 equal to its fair market value on the date of your death. If your child sells the property the next day at $600,000, they recognize zero capital gain. The entire $400,000 of appreciation is permanently eliminated.
Lifetime gifting also carries Medicaid risk: any transfer below fair market value within the 60-month lookback window under 42 U.S.C. § 1396p(c) is a penalizable uncompensated transfer. There is no statutory cap on the resulting penalty period.
The 2026 annual gift tax exclusion is $19,000 per recipient. For a property worth $600,000, you would need 31 years of maximum annual gifts to transfer it without touching your lifetime exemption — and every gift locks in carryover basis along the way.
Method 3 — Revocable Trust: The Recommended Starting Point
A revocable living trust solves every problem a will creates and avoids the step-up basis trap of lifetime gifting.
Probate avoidance. Property held in a revocable trust passes directly to your named beneficiaries under the trust terms at your death. No Probate Court. No executor commissions. No 12–18 month wait. The successor trustee steps in and transfers the property — or continues managing it — according to the instructions you left.
Step-up in basis preserved. Revocable trust assets are included in your gross estate under IRC § 2038. Under IRC § 1014(b)(2), property held in a revocable trust qualifies for the full stepped-up basis at death. Your children inherit the rental property at its date-of-death fair market value, with zero embedded capital gain.
Distribution control. A revocable trust lets you set the terms. You can direct that your 22-year-old receives income from the property until age 30, then receives the property outright. You can give your 35-year-old their share immediately. You can require co-trustee oversight before any property is sold. A will cannot do any of this — it distributes everything at the close of probate to whoever is named, with no conditions.
Minor children. If a child is under 18, a revocable trust is essential. Without a trust, a minor cannot hold title to real property in Georgia. The court appoints a conservator — a separate court proceeding — to manage the property until the child turns 18, at which point everything distributes outright with no conditions. A trust keeps the property under trustee management for as long as you specify and distributes at the ages you choose.
Method 4 — LLC + Revocable Trust: The Complete Structure for Active Portfolios
For investors with multiple rental properties, the full structure adds one layer: each property in its own Georgia LLC, with the LLC membership interests held in the revocable trust.
The LLC provides liability isolation during the investor’s lifetime — a judgment on one property cannot reach the others. The trust holds the LLC interests, so at death those interests pass to your children through the trust without probate. The stepped-up basis applies to the LLC membership interests under the same IRC § 1014 analysis — your children’s basis in the LLC interest resets to the date-of-death value of the underlying property.
Each child can receive their LLC membership interest outright, or the trust can continue to hold it for them until they reach a specified age. If you have three properties and three children, the trust can direct one LLC interest to each child — cleanly, without court involvement, without forced co-ownership of a single property, and without the sale that co-ownership often eventually requires.
For the complete structure and what each layer costs, see Best Way to Hold Rental Properties in Georgia for Estate Planning.
