Can an LLC be a trust beneficiary [Solved]



Last updated : Sept 25, 2022
Written by : Matthew Bergami
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Can an LLC be a trust beneficiary

Can a trust own an LLC in Texas?

The owners of an LLC are called “members.” A member can be an individual, partnership, corporation, trust, and any other legal or commercial entity.

Can a trust own an LLC Illinois?

Other Considerations for Placing Your LLC in a Trust Although the law permits a trust to own an LLC, the LLC operating agreement may not.

Can an LLC be an trustee on a trust in Texas?

Trust Basics (2) The trust corpus (or trust estate) is the asset—in this case investment property—that is conveyed into the trust. (3) The trustee controls the trust with authority to manage, maintain, lease, and sell the trust property. An LLC cannot usually be designated as trustee.

Can a trust own a business?

So, in the context of business structures, a trust allows the trustee to manage the business for the beneficiary's benefit. This means the trustee has legal ownership and control of the business' property and other assets, which will eventually end up with the beneficiary (in some cases, there may be more than one).

Can my LLC buy my house?

You may wonder, "Can an LLC buy a house?" The short answer: Yes. You may want to explore the idea of buying a house with an LLC to enable your business to own property or to have your LLC make your next real estate purchase.

Can a trust be a manager of an LLC in Illinois?

One of those questions, simple in its asking but surprisingly involved in its answering, might be whether a limited liability company (LLC) can be owned in part or in whole by a trust. The answer is yes, a trust can own an LLC, either as the sole owner or as one of many owners.

Can you live in LLC rental property?

An LLC is a business entity that has its own rights, and buying and owning real estate are indeed among them. So the answer is yes, you can in fact live in a house that is owned by your LLC — as long as your operating agreement allows it.

How are trusts taxed?

For trusts, distributions are taxable to the beneficiary, and the trust must file a Schedule K-1 for each beneficiary paid. The beneficiary will then report the income on their tax return. The trust must also generate a Form 1041 to report the total amount of income the trust earned from the grantor's date of death.

What is the difference between a trust and an LLC?

LLCs are a type of business entity that shields owners from liability for business debts and avoids double taxation while providing for a flexible structure to manage the business. Trusts are used as repositories for assets that will be distributed to beneficiaries after the death of the original owner.

What is the difference between LLC and C Corp?

LLCs are considered pass-through entities for the purpose of US taxation; they don't file taxes in their own right, but have their income reported on the personal income tax returns of their owners. C corporations file their own tax returns.

Why do people put their business in a trust?

A living trust for a business relieves the burden of business debts on your family members. If your business is not in a trust, business assets may be used to satisfy personal debts, and that could cause the business to fold. The living trust also reduces the tax burden on your estate.

What are the disadvantages of setting up a trust?

  • The most significant disadvantages of trusts include costs of set and administration.
  • Trusts have a complex structure and intricate formation and termination procedures.
  • The trustor hands over control of their assets to trustees.

What are the disadvantages of a business trust?

  • the structure is complex.
  • the Trust can be expensive to establish and maintain.
  • problems can be encountered when borrowing due to additional complexities of loan structures.
  • the powers of trustees are restricted by the trust deed.

What is the advantage of putting a property in an LLC?

Avoiding personal liability This is the major advantage of an LLC. You want the best option for limiting your personal liability should an unforeseen circumstance arise relating to your property. LLCs provide that protection.

Can you live in a property owned by your company?

Sometime you can live in the property owner by your limited company. This depends on your mortgage. If you have a buy to let mortgage, most lenders expressly forbid you from living in the property.

Where is the best place to start an LLC?

Delaware. Delaware takes one of the top spots as the best state to form LLC. More than 50% of all U.S. publicly-traded companies and roughly 63% of Fortune 500 companies are incorporated in Delaware.

Who is the organizer of an LLC?

An LLC organizer is involved in the formation of the LLC. The organizer signs and files the Articles of Organization. The organizer of an LLC may be separate from the members or managers of the company.

How do you create a trust company?

Procedure for forming a Charitable Trust Creation of a public Trust is governed by the General law; whereas the creation of a private Trust is governed by the Indian Trusts Act. A public charitable or religious institution can be formed either as a Trust or as a Society or as a Section 8 Company.

Can you put an S Corp in a trust?

Generally, a trust cannot hold stock of an S corporation; however, grantor trusts, testamentary trusts, voting trusts, ESBTs, and qualified Subchapter S trusts (QSSTs) are permissible S corporation shareholders (Sec.

What is the Augusta rule?

What is the Augusta Rule? The Augusta Rule, known to the IRS as Section 280A, allows homeowners to rent out their home for up to 14 days per year without needing to report the rental income on their individual tax return.


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Can an LLC be a trust beneficiary


Comment by Taylor Stattelman

hi this is the business guy with asset protection planners and lawyers limited and people often ask me can i put my llcs into a living trust so my answer is this yes you can put your allc's into a living trust but that's not the right question the question is should i put my llc's into a living trust and the answer is no and here's the reason why the reason is because an llc is an asset protection device a living trust is not it's an estate planning tool so putting the llc inside the living trust kills half of the llc's protection and by the way if you're watching this video on youtube please click the like button below so youtube will promote this video i'd really appreciate it and if you're new here please click the subscribe button and the notification bell so that when more videos come out like this you'll be up to date right away here's why a lot of estate planners a lot of asset protection people get this one wrong big time with a revocable living trust the word revocable means changeable so if you set it up you can also change it so you can change the beneficiary to somebody else let's say if you have a child that becomes a drug addict and that's going to be a lifelong thing you think well you probably don't want that child to inherit 500 000 of your wealth right because you know what would happen it would just go straight up their nose if they're into cocaine or whatever it is so naturally you're not going to want to encourage that habit and give them a whole pile of money even though you love them they're your child but it wouldn't be to their best interest to receive a big pile of money fuel their drug problem so you're going to take them away as beneficiary do some other arrangement maybe you will have the trust pay for the rehab but you can change that and you can incorporate that into the trust with a revocable trust you can do that now on the other side when somebody sues you and somebody gets a judgment against you then the judge can force you against your will to make changes to that trust in other words whatever you have the ability to do personally in most cases your creditor can step into your shoes and do the same thing so that means if you have the ability to change the beneficiary to anybody on the planet that also means your judgment creditor can jump into your shoes and change the beneficiary of your trust to anybody on the planet that if it's a revocable trust okay now we set up asset protection trusts or we have third party trustees different story not all vehicles are four-wheel sedans there are motorcycles they're dump trucks they're race cars not all trusts serve the same purpose some vehicles are rockets that go to the moon some vehicles are submarines there are different vehicles for different purposes and there are also different trusts for different purposes so not all trusts are the same just because it has the word trust behind it okay now let's look at the protections of an llc somebody sues your business like your llc owns rental property and somebody slips and falls and they sue for more than your insurance covers happens every day the llc is a lawsuit protection device so that when that lawsuit happens inside the llc it can actually protect you from losing your furniture your house your car your personal bank account so it acts as a shield the llc acts as a shield to protect you from losing your personal assets what if the lawsuit comes from the other direction you get sued personally you're driving home on friday night you're rearing somebody's car and you get sued for more than your insurance covers again that happens every day with an llc it acts as an asset protection device so there are provisions in the law of most states in most states you need to have two or more members of that llc to have the protection from this side of the equation the personal side so somebody sues you personally there are provisions in the law to protect that llc from being taken away from you and everything inside of it like the rental property you have lawsuit protection when the business is sued with an llc and then you have asset protection when you're sued personally to protect that llc from being taken away from you personally or the things inside of it says is rental property stock market investments for example you put that llc into a living trust and what happens you're taking away that asset protection aren't you see where i'm going with this your llc somebody sues you personally it can protect you from having that llc taken away from you and anything inside of it but if you put the llc now inside of a living trust the judgment creditor can step into your shoes and make you change the beneficiary of that living trust to that judgment creditor the person who sued you and now they not only own your living trust and all the assets inside of it one of the assets inside of it is the limited liability company isn't it now they take your llc away from you so that defeats the purpose of the asset protection of an llc so that's why it's so important to know these things and don't just listen to any old asset protection strategy if somebody recommends you put your llc inside of a living trust that's not a very well thought out strategy so we don't put the llc's inside the living trust so there are two solutions solution number one that llc can go in your will yes it will have to go through probate or solution number two you write a succession plan in the operating agreement of the llc that says when this member dies the membership in this llc goes to and you can name your children for example so you can put the estate planning provisions the succession plan into your llc operating agreement so you maintain the asset protection benefit while you're still alive so that's the answer the question that i get so much can i put my llc inside of my living trust and the answer is yes you can but the answer is also no you shouldn't there are other ways to pass the llc onto your heirs that doesn't include losing your asset protection hope this is helpful please click like subscribe and share this video with others thanks for watching this is the business guyyou


Thanks for your comment Taylor Stattelman, have a nice day.
- Matthew Bergami, Staff Member


Comment by uitspringb

hi lee phillips again i want to talk about something that a lot of people are saying oh you got to do this and that is you have to set up the llc and then make the llc the beneficiary of your trust and they're usually referring to this in the concept or the context rather of a land trust now a land trust is just an revocable trust it's like a baby living revocable trust that you use for estate planning except it doesn't have all of the estate planning provisions in it usually it's a trust created to hold real estate there are a half dozen eight states that actually have land trust laws unless you're in one of those states illinois was the first one unless you're in one of those states then your land trust is looked at as a baby living revocable trust so they say okay make your land trust and then have the llc be the beneficiary of the land trust and that gives you asset protection and i've got to have somebody explain that to me because i've talked to a lot of lawyers i've scratched my little noodle and thought about it and none of us who i'm going to say are in the know can figure out what the llc acting as beneficiary does for you in the way of asset protection a beneficiary usually doesn't have any ownership in a trust they have the potential of getting the benefit from the trust and if they're sued then as long as the trust has what we call a spendthrift provision in it and people make a big deal out of a spendthrift trust a spendthrift trust is just a trust that has one paragraph out of the 40 pages that says the beneficiary doesn't have any rights to their beneficial interest until they get their greedy little mitts on the money they don't have an interest in it they get divorced it's not part of the divorce proceeding that spend thrift provision is a critical part of your trust but if the spendthrift provision is there then the beneficiary can't get sued and have the trust affected they can't give away their beneficial interests they can't do anything they are detached from the beneficial interest that they have in the trust if they get money it's their money somebody consume and take it away from it but until they actually get the money they have basically no interest in this trust so the spencer provision is important why do we have an llc as the beneficiary of the trust when the beneficiary of the trust you can't sue the beneficiary and get at the trust why do that i don't know and if somebody wants to tell me i'm certainly willing to listen to them and i will redo this video but as far as i can see there is no benefit to having an llc be the beneficiary of the living revocable trust there's no asset protection benefit now don't forget to subscribe okay because we keep putting these videos out and discussing different areas in the law uh we do land trust we do living revocable trusts we do llc's we do tax stuff we do all sorts of stuff and it's practical information that you need to know i'm not trying to be a lawyer and speak legalese i'm trying to be down to earth and talk everybody else's language and sometimes that comes across the little the lawyers raise their eyebrow at me and go well that's not quite right yeah but you know what i'm saying mr lawyer and everybody can understand what i just said so don't forget to subscribe we will send you an email when we send out or put out a new video so that you'll be up on what it is you don't even have to open the email but it's just a notification uh that means we've got to have your email address and we don't really get it when you subscribe so if you want us to email you you're going to have to email us your email and ask for it email info info at legally l-e-g-a-l-e-e-s dot com info at legal l-e-g-a-l-e e s dot com it's a pun on my name lee phillips talking about legal stuff


Thanks uitspringb your participation is very much appreciated
- Matthew Bergami


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