New York Estate Planning & Elder Law Blog
For many business owners, it’s a critical issue to make sure that business organizations including LLCs are properly structured. While many business owners have created revocable living trusts to articulate how their assets should be managed and to avoid probate, it’s a good idea that LLC interests are not put into the trust. This means that even if everything else with an estate plan is done correctly, a family would still likely need to undergo the probate process to both access and manage LLC interests. This, however, is not the best situation and there are more preferable options.
Placing an LLC interest into a trust is often a simple and affordable option. While it might be possible to simply file paperwork if an LLC involves a single member, it might be necessary to articulate such arrangements in an operating agreement. Many times, there are provisions in operating agreements that allow individuals to make these transfers. If no such provision exists however or there is not an operating agreement, the consent of the other LLC members is often required to perform such a transfer.
The Advantages of Utilizing an LLC for Estate Planning
Creating an LLC for your family provides several advantages to your loved ones after you pass away. These benefits include distributing assets to beneficiaries during your lifetime without being subject to as substantial an amount of gift taxes, maintaining control over your assets, and reducing the estate taxes your child or other beneficiaries must pay on assets they receive.
What Assets LLCs Can Hold
LLCs are distinct legal entities that can carry various assets on behalf of an individual. After passing assets to an LLC, the individual members of an LLC are viewed as each holding a portion of the asset. Some of the most common types of assets that people decide to place in LLCs include cash, personal property, and real property.
The Tax Advantages of LLCs
A powerful estate planning tool is to pass on assets while you are still alive. Up to $15,000 can be gifted each year to another individual without the giver having to pay taxes. By making gifts during your lifetime, the gifted assets are not subject to estate taxes of up to 40% after you have passed away. While you will not receive an income deduction for these gifts, individuals who receive the assets must report them as incomes. LLCs, however, offer the opportunity to reduce estate taxes by transferring assets to an LLC while still maintaining control of the funds. While satisfying fiduciary duties created by the LCC, you will give your ownership interests away to your chosen beneficiaries. Consequently, the value of the LLC is deducted from your taxable estate.
Contact a Knowledgeable Estate Planning Attorney
Remember, one of the primary advantages of LLCs is that a person can keep control over gifted assets and make sure that funds are used in the desired manner. To make the most of an LLC for estate planning purposes or to ensure that your assets are protected after you pass away, it can prove advantageous to speak with an experienced attorney. Contact Ettinger Law Firm today for assistance.