Why You Should Consider Putting Your LLC into a Trust
The limited liability company (LLC) is a popular business structure that offers liability protection and avoidance of double taxation. Trusts are popular asset transfer vehicles that allow you to avoid probate and keep assets out of the hands of creditors.
Transferring an LLC to a trust requires a bit of paperwork, but a well-planned transfer can help reduce risks, keep your business affairs out of government hands, and fit into your broader estate planning goals. Whether you own a single-member LLC or are a co-owner of a multimember LLC, your LLC ownership interests are considered personal property. Indeed, your business interests are probably one of your most valuable assets.
The following are some of the key benefits of placing LLC interests in a trust:
- Probate avoidance. Probate is the legal process of settling an estate when somebody passes away. Overseen by the court (i.e., the government), probate ensures that your debts are paid off and your assets—including business interests—are allocated to the beneficiaries you specify in your will. Assets that are placed in a trust generally avoid probate, which can take weeks or months to complete, leaving the operations of your business at risk.
- Privacy. Not only can probate be lengthy and cause your business to languish—a probated estate is a matter of public record. That means anyone who knows where to can learn details about your estate. Trusts, on the other hand, bypass probate, and pass to your beneficiaries privately.
- Incapacity planning. What happens if an accident or illness renders you incapable of fulfilling your business duties? If your LLC interests are held in a trust, the trust can be structured so that your incapacity immediately triggers the authorization of another person to take over on your behalf.
- Asset protection. Depending on the type of trust in which you place your LLC membership interests, the trust can make it more difficult for creditors to go after the trust assets.
The three main types of trusts that are commonly used with LLC asset transfers are revocable trusts, irrevocable trusts, and asset protection trusts. Each type has pros and cons for holding LLC assets. Our attorneys can help you decide if transferring an LLC interest to a trust is the right move for your situation. Please contact our office and schedule an appointment.
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