Estate Planning
LLCs, Asset Protection & Estate Planning
Coordinating LLC ownership with your revocable trust for investment property, rental real estate, and closely held businesses.
For clients who own rental property, investment real estate, or a closely held business, estate planning often involves more than transferring assets into a revocable living trust. The way an asset is owned during life can be just as important as determining who will receive it at death.
Different Structures, Different Purposes
A limited liability company and a revocable living trust serve different purposes. An LLC can provide a legal separation between liabilities associated with an LLC-owned asset and the member's personal assets, subject to proper formation, operation, capitalization, insurance, and other applicable law. A revocable living trust, by contrast, generally does not protect the settlor's assets from the settlor's own creditors during life. Its principal role is estate planning, including management during incapacity, continuity of ownership, and transfer of assets at death without probate when properly structured and funded.
How the Two Structures Can Work Together
The two structures can work together. Rather than transferring LLC-owned real estate out of the LLC and into the trust, the owner can often assign the membership interest in the LLC to the revocable trust. The LLC continues to own the underlying property, while the trust owns the membership interest in the LLC.
Preserving the Purpose of Each Vehicle
This structure can preserve the separate purposes of each vehicle. The LLC remains the entity through which the investment property or business is owned and operated, while the trust provides a mechanism for succession if the owner becomes incapacitated or dies. The successor trustee can then administer the LLC interest according to the trust rather than requiring the membership interest to pass through probate.
Integrated Planning for Complex Ownership
Effective planning therefore requires more than asking whether an asset is "in the trust." It requires examining how the asset should be owned, what liabilities accompany it, and how that ownership should integrate with the client's broader estate plan.
Coordinate Your LLC and Estate Plan
If you own investment property or a business through an LLC, a coordinated review of your ownership structure and estate plan can help ensure both are working together as intended.
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