While you may only associate LLCs with small businesses, you may be surprised to learn they can benefit your estate plan. If interested in using a Family LLC to your benefit, it’s necessary to understand what this is, what the advantages of establishing an LLC are, and why it’s in your best interest to consult a seasoned Medina, Ohio estate planning lawyer to help you through this complex matter. The following blog can answer some of the most common questions about this estate planning choice.
What Is a Family LLC?
A Family LLC is a type of Limited Liability Company (LLC) in which those related by blood or marriage create the entity. An LLC generally provides the creators with protections regarding liability and taxation. Essentially, this allows the creators of the LLC, formally called members, to shield their personal assets in the event the LLC is sued over debts or incurs high taxes. For example, if the business is sued over a debt, only the assets held in the LLC are vulnerable. If you own a home, the courts cannot seize that unless it has been transferred to the LLC.
A Family LLC also makes the transfer of assets from members to their children or Beneficiaries a simpler and smoother process. Essentially, the LLC is managed by the parents, while their children and grandchildren hold shares but have no management rights.
What Are the Benefits of This Option?
One of the primary benefits of establishing a Family LLC for estate planning purposes is to reduce the size of the estate. Allowing your children or grandchildren to assume shares in the company helps reduce the size of the stake the creators have, thus reducing the Estate Tax imposed on the company when the members pass away.
Additionally, when you transfer ownership of assets in a Family LLC, you will not incur the gift tax. Generally, those who gift will pay taxes on transfers exceeding $17,000 annually. However, when assets are moved within an LLC, this helps reduce the amount of taxes you will pay.
If you create a Family LLC, you’ll have the ability to retain assets within your family, as you can create restrictions on sharing assets outside of family members. This is ideal for those who wish to keep the family business strictly family.
As you can see, there are many benefits to creating a Family LLC. However, doing so without the assistance of an experienced lawyer can complicate matters. Because this option can help shield your assets from lawsuits or debt collectors, working with someone who understands how to establish one is critical. Unfortunately, failure to properly create an LLC can leave you vulnerable. However, the team at Krause Law has the experience you need to help protect your assets to provide peace of mind for the future. Contact us today to learn how we can assist you.
