How Can an LLC Help You with Estate Planning?
By: Barry E. Haimo, Esq.
October 7, 2021
For many people who are working on an estate plan, one of the biggest concerns they have is the amount that will need to be paid in gift taxes or estate taxes upon their death. After all, you’ve worked hard for what you have, and the thought of taking a big financial hit in the process of passing it on to another leaves a bad taste in your mouth.
Luckily, there are many tools at the disposal of those crafting an estate plan that can help minimize the tax burden on your estate, making leaving a legacy you can be proud of easier than you think. One of those tools is the use of a limited liability company (LLC) that can work to protect your assets as they get passed on. Here are the advantages of forming an LLC to help with your estate planning.
LLC: What Is It?
An LLC is another entity like a corporation or a sole proprietorship. The owner of the LLC is protected from liability but, unlike a corporation, LLCs offer more flexibility. Meaning they can be organized in whatever way the owner would like – and managed how they like, too.
Additionally, there are fewer filing requirements for an LLC in comparison to a corporation, which makes it attractive to many people because it’s less expensive to maintain. Members of an LLC must report both their income and losses from the business on their personal tax returns due to the fact that it’s considered a pass-through entity. That makes filing taxes less burdensome.
How Is an LLC Used in Estate Planning?
An LLC is a great tool in estate planning because the process of transferring assets through an LLC is quite simple. In fact, owners of an LLC can transfer assets while still having control of the LLC.
Depending on the governing documents there may be some restrictions on transfers, but those restrictions can work to protect assets from creditors or from heirs that you don’t expect to make good financial decisions.
What Kind of Assets Can Be Held in an LLC?
An LLC is its own legal entity. That means it can hold many different types of property on your behalf. Some examples of assets often held in an LLC include real property, cash, and personal property. Each member of the LLC holds a portion of the assets in it. How much each member owns would be reflected in the operating agreement and members may be added or removed when necessary or desired.
Asset Protection Through an LLC
One of the biggest reasons people use an LLC in their estate plan is because it’s a great way to protect assets. While many may use trusts to protect assets, they aren’t as flexible as an LLC — especially irrevocable trusts. And some situations may benefit from including both trusts and an LLC in an estate plan.
An LLC can help you accomplish your goals of staying flexible while still protecting the things you’ve worked so hard for — while allowing you to remain in full control of your property.
When you use an LLC to hold property, it’s not considered a part of your estate because you’ve transferred those assets out of your name to the LLC. That allows your beneficiaries to avoid paying federal estate taxes on the property at your death.
If you’re interested to learn more about how you can use an LLC as a part of your estate plan, contact the experts at Haimo Law today. We’ll help you protect your family, assets, and business, and gain the peace of mind from knowing you’re prepared and in control.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.