You may have worked on an estate plan to protect your personal property and provide for your family, but what about your business investments? If you transfer your LLC into a trust, you can safeguard your business and ensure it’s managed as per your instructions. In today’s blog, we’re discussing the benefits of transferring your LLC into a trust.
What is an LLC?
An LLC, or Limited Liability Company, is a popular type of business structure. It protects its owners and shareholders from personal responsibility for its debts or other liabilities. LLCs are hybrids, combining characteristics of a corporation and a partnership or sole proprietorship. LLC members can include both individuals and corporations; there are no restrictions to the number of members.
A living trust is a legal tool that provides for the management of assets, as well as the distribution of those assets, when the grantor (the person who creates the trust) passes away. It goes into effect while the grantor is still alive, holding assets and distributing them to the grantor’s specific instructions. A living trust allows for the management of the grantor’s affairs, in case of incapacity. With a living trust, you can also transfer assets immediately after death, without having to go through a potentially lengthy and expensive probate process.
The two most common types of living trusts are revocable and irrevocable. With a revocable trust, the grantor can terminate the trust or change its terms at any time. Alternatively, with an irrevocable trust, the grantor cannot easily change the terms once the trust is in place.
Transferring an LLC into a Trust
In Georgia, to create a living trust means drafting the trust document with your estate planning attorney and signing it in front of a notary public. Once signed and notarized, you then must “fund” the trust by transferring assets to the name of the trust. This can include changing property titles and beneficiary designations. You must name the intended successor and successor trustee, as well as provide specific instructions as to the operations of the business if the grantor becomes incapacitated or dies. During their lifetime, the business owner would serve as both the trustee and the beneficiary, allowing them to run the LLC as normal for as long as they chose.
When you transfer ownership of an LLC into a trust, the trust owns the LLC before and after the incapacity of death of the LLC member. Depending on your agreement, you may need approval from the majority of the LLC owners/members before you can transfer interests in the company into your living trust. Once transferred, the trust will own the LLC but any voting rights will stay with you. If you properly create the living trust, but fail to correctly transfer your LLC membership interest to the trust, the LLC assets will likely have to go through probate after you pass away.
Benefits of Transferring Your LLC to a Trust
Whether you’re planning to sell your LLC or maintain it for several years, transferring the LLC to a trust does have a number of benefits. First, if you assign your LLC to a trust, your trustee can take over and manage the business if you become incapacitated or pass away unexpectedly. Second, the trustee must manage the LLC as per your instructions; you can specify things like the business beneficiaries, whether to liquidate, or your preferred future LLC owners. Third, if you create a revocable living trust, you can change the terms or terminate the trust at any time – which can be useful if you later decide to sell the business.
Have Additional Questions? Contact Brian M. Douglas & Associates
If you’re curious about whether to transfer your LLC to a living trust, the estate planning attorneys at Brian M. Douglas & Associates can walk you through your different options. We’ll help you determine the best way to protect your business and your loved ones. To learn more about living trusts or to schedule a consultation, contact us at (770) 933-9009 or use our online contact page. We’re always happy to help!