Why Place Your LLC Into a Trust?

One of the most popular business structures is a limited liability company (“LLC”) because it avoids double taxation to the owner and offers personal liability protections. A trust is a legal arrangement in which a trustee holds and manages assets for the benefit of designated beneficiaries. A properly structured trust can help your family avoid probate after your death and, in some cases, may provide protection from creditors, depending on the type of trust and applicable state law.. As a business owner, you can place your LLC membership interest into a trust, enabling the trust to own and manage the interest, while retaining the advantages provided by both the LLC and the trust.

Funding a trust with an LLC interest requires thorough documentation and compliance with state trust laws. If there are other members in the LLC, you may have certain restrictions in an operating agreement to place your membership interest into a trust. By ensuring your transfer complies with your LLC operating agreement and is well executed, it can be a good fit for your overall estate planning goals. Below, our Utah estate planning attorney outlines the biggest benefits of placing your LLC into a trust.

Avoid Probate 

A trust is legally distinct from the grantor, the person who creates the trust. Assets properly transferred into the trust are generally not considered part of the grantor’s probate estate, which means they can usually avoid the probate process. Probate is a long and costly process that many people want to help their loved ones avoid. If your LLC is not in a trust, business operations may be interrupted until probate is closed. This can negatively impact your loved ones, your business, and ultimately, your legacy. Placing an LLC into a trust can avoid these issues.

Confidentiality

In addition to being expensive and lengthy, anything that happens in probate court also becomes a matter of public record. This means that anyone who knows where to look, such as disinherited heirs, creditors, and even scammers, can find the details of your estate. Because trusts are not subject to the probate process, you can keep the details of the trust, and your LLC confidential by avoiding the probate process.

Planning for Incapacitation

Have you planned for what you would like to happen to your business if you become incapacitated or you pass away? You may want a loved one to have your membership interest in the LLC or you may have drafted a buy-sell agreement that allows the other members of the LLC to buy out your membership interest upon your death. Further, if you suffer a sudden illness or accident that renders you incapable of running your LLC, your trust can be structured to authorize your successor trustee, as designated in the trust document, to assume responsibility for managing the LLC’s operations on your behalf.

Our Estate Planning Attorney in Utah Can Help Establish Your Trust

There are many benefits of establishing a trust to hold your LLC interest, but this must be executed very carefully. There are many things to consider, such as whether your operating agreement allows it, obtaining consent, and more. At AGS Law, our Utah estate planning attorney will ensure that all aspects have been planned for and that your trust is executed properly so it will bring you, your business, and your loved ones the peace of mind you need. Call us today at 801-477-6144 or contact us online to request a consultation with our experienced attorney and to learn more about how we can help.

Source:

le.utah.gov/xcode/Title75/Chapter7/C75-7-P6_1800010118000101.pdf