An LLC can provide asset protection, as well as other benefits.
You want to leave assets to your family.
Unfortunately, taxes can take a chunk out of the assets you choose to distribute.
What options do you have for preserving the bulk of your estate.
According to a recent Investopedia article titled “Using an LLC for Estate Planning,” creating an LLC can help.
What is an LLC?
An LLC is a limited liability company.
As its very name suggests, this legal entity protects its owners from personal liability of lawsuits, debts, or other claims.
With an limited liability company, property like your home, investments, personal bank accounts, and motor vehicles are shielded from these events.
A family LLC created with your children may even allow you to reduce your estate taxes liability.
It can also serve as a means of transferring assets to your loved ones during your lifetime while minimizing gift taxes.
How does a family LLC work?
The parents maintain the management of the limited liability company.
The children and grandchildren simply hold membership interests.
But what does this mean?
The children and grandchildren have no voting rights.
Instead, the parents make all purchasing, selling, trading, and distributing decisions on behalf of the LLC.
The other “family” members are only able to sell or transfer membership in the company within the family itself.
If you are the parent, you can keep control over the assets held in the LLC while protecting them from poor decisions made by younger family members.
If you gift membership interests, gift taxes may apply.
Despite this fact, a limited liability company can afford you several tax benefits and lower the value of your estate.
The value of membership units transferred without management rights may be discounted up to 40 percent of their market value.
Doing so can help you gift above the current $15,000 annual gift exclusion limit without owing gift taxes.
The rules governing limited liability companies are not the same in each state.
In fact, the rules can be rather complex.
This is not a DIY project.
Before creating an LLC, work with an experienced estate planning attorney to determine whether this is a suitable strategy for your tax and estate planning.
Reference: Investopedia (Oct. 25, 2019) “Using an LLC for Estate Planning”