Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Thursday, July 17, 2014

Using an LLC as an Estate Planning Tool

Couple doing paperwork

The Limited Liability Company (LLC) is a hybrid legal entity that is beneficial not just for small-business owners, but is also a powerful tool for estate planning.  If you want to transfer assets to your family members, but are worried about gift and estate taxes, an LLC can protect assets during your lifetime and reduce taxes owed by you or your family members.

Creating a family LLC with your children allows you to reduce not only the estate taxes your children would be required to pay on their inheritance, but it also enables you to distribute inheritance to your children during your lifetime, without being bludgeoned by gift taxes.  This is made possible while also providing the ability to maintain control over your assets. 

In a family LLC, the parents maintain management of the LLC, with children or grandchildren holding shares in the LLC’s assets, however, they do not have any management or voting rights.  This allows parents to buy, sell, trade or distribute the LLC’s assets.  Thus, parents can maintain control over the assets and protect them from financial decisions made by younger members. 

Upon establishing your family LLC, you can begin transferring assets pursuant to your state’s legal process.  You subsequently decide on how to translate the market value of those assets into LLC units of value, similar to stock in a corporation.  It then becomes possible to transfer ownership of your LLC units to your children or grandchildren. 

See Michelle Ullman, Using an LLC for Estate Planning, Investopedia, July 15, 2014.


Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink

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