When people begin drafting their estate plan, they often debate who to give their personal assets to after they pass away. Often, these assets include real estate, monetary funds and sentimental items. For those individuals who worry about gift and estate taxes and want to pass their assets onto their children, they should consider creating a limited liability company—called an LLC. While LLCs are often used for small businesses, they have tax and other financial advantages. Below are so common questions and explanations about including an LLC in an estate plan.
What Is an LLC?
A Limited Liability Company, or an LLC, is a popular type of business structure that protects owners from most legal liability, like a corporation. This means LLC owners are typically not liable for debts incurred by the LLC business—meaning personal assets like personal bank accounts cannot be collected. However, LLC owners do report income and losses from the company on their personal tax returns.
How Can I Include an LLC in my Estate Plan?
For individuals with large estates who are worried about taxes but want to pass their assets onto their children, attorneys will often advise them to create an LLC. To include an LLC in an estate plan, parents and children create the LLC together and transfer assets into it. These assets often include monetary funds and real property. The parents are then made managing members of the LLC; this allows them to have control over the assets. Then, the parents will transfer assets in the LLC to their children—often named non-managing members of the entity.