Planning Your Estate with a Limited Liability Company
LLCs are becoming more and more popular in estate planning. Trusts are still king, but now they’re generally used in conjunction with LLCs so that your assets are protected while you’re still alive. A trust usually doesn’t provide any asset protection whatsoever, whereas an LLC provides dual liability protection.
With estate taxes as they are, if you have a large estate worth more than $1 million, you may want to start gifting your assets to your heirs while you are alive. LLCs are especially useful for this purpose because they allow you to gift small portions of large assets (such as real estate) by gifting membership shares.
They also enable you to maintain control of the assets while you are alive, even if your heir is the majority owner of the LLC. You do so by making yourself a manager of the LLC until your death, at which point your heir takes over.
When you actively plan your estate by using trusts and LLCs, you have much more control over what happens to your assets after your passing. An LLC can keep your estate out of probate and avoid the accompanying (often astronomical) probate fees (costs that are incurred when the court system has to distribute an estate).
A word on probate: If the Spanish Inquisitors had been just a little bit more vicious, they probably would have just subjected their victims to the bureaucratic nightmare that is probate. In probate, you leave the major decisions up to a judge, and you never know how things could turn out.
With an LLC, you can ensure that your assets go to the right people and don’t get dwindled away with legal fees until they turn to dust.