The words “Limited Liability Company” or LLC are synonymous with business ownership, but LLCs can also be used as a part of your estate plan. Family LLCs, in particular, are often used in estate planning, hence their name. What is a family LLC, and how can you use it to greatest effect for your own estate plan? Keep reading to find out. If you still have questions afterward, please call a Hartford County probate attorney. We’ll explain how a family LLC can help you in your specific circumstances during an appointment.
What Is a Family LLC?
A family LLC is a limited liability company (or LLC) owned by people in the same family. If you were to form an LLC, you’d be able to add your siblings, children, cousins, and even people without any family ties to you at all. Despite the name, family LLCs are not legally distinct from plain old LLCs, and as such, there are no legal restrictions on who can be a part of the LLC.
The name “family LLC” stems not from legal requirements to form one, but rather from the scenario in which these companies are most frequently used. Although you do not have to be a family member to be part of a family LLC, there will always be some family members when a family LLC forms. The family members will own the LLC and it will be transferred to them when the time comes. Family LLCs are often established and employed for estate planning.
As an example, suppose a married couple owns a bakery, which they want to pass down to their children and grandchildren. They may create an LLC as the vehicle to transfer their business, as well as make sure the business stays in the family. You do not have to be in the family to be part of it, but in our example, the married couple could restrict transfers to non-relatives. By forming a family LLC, the married couple may also now have the option of estate and gift tax benefits.
Otherwise, a family LLC is identical to any LLC. They must all follow the same rules and regulations.
What Are the Benefits of a Family LLC & How Can I Incorporate it Into My Estate Plan?
Reach out to an experienced probate attorney for help in creating an LLC for yourself and your children. You, the parent, will be a managing member of the LLC, with control over assets brought into the LLC. Meanwhile, your children will be non-managing members, and as such, restricted in what they can do regarding the LLC.
Thus established, you’ll be able to transfer cash, your house or any other real estate holdings, and businesses into the LLC, among other assets. Assets within the family LLC will be protected from your creditors and from incurring taxes like gift and estate taxes. This in turn gives you a greater degree of control in managing your family’s money, property, and assets.
