LLC’s and Estate Planning

by David Disraeli

When people hear the term “estate planning” they think of wills/trusts and mortality. While it is true that estate planning provides instructions about the distribution of assets at death, it is much more. Think about it this way: an estate not just the assets of a deceased person but also the assets of a living person. A complete estate plan provides protection for one’s wealth while alive and well, during a period of impairment and ultimately distribution at death. Does yours?
Almost everyone will travel through three phases of life:

1. Accumulation of assets – investing – spending
2. Physical or mental impairment – legal impairment (being sued)
3. Death

A complete estate plan anticipates all three stages, not just distribution at death. Oftentimes, when we are healthy and things are going well, we don’t spend much time contemplating all the “what ifs”. What if you can’t manage your affairs? What if you get sued?

Fortunately, there are tools that can be woven together to create a strong rope tied around your assets with the flexibility to accomplish your goals, regardless of what those goals are. This article cannot go into detail regarding all the various combinations of strategies to create this fortress I am describing. However, one mechanism I have used involves the combination of an LLC and a will. LLCs are known for operating businesses and liability protection but what is not well publicized is their enormous estate planning benefits. Having been involved in the development of many estate plans, the subject of probate comes up often. Some will go to great lengths to avoid probate by setting up living trusts or using other non-probate transfer methods. The LLC allows you to pass assets of any type without probate. Why? Because the LLC is not a person who dies, but an entity with an infinite lifetime.
Why should you worry about probate? When a person passes away, with or without a proper will, the state in which the person lives has laws about how their property gets distributed. This is called probate. When a will is probated it becomes a public record – meaning anyone who is curious may find out what you left and to whom. If your assets are inside an LLC, all that is known is who inherits the LLC units, not what they contain! While a nosey person with a lot of time on their hands may discover what real estate is owned by an LLC, the cash, securities, and bank accounts are not public (nor is the name(s) of the owners of LLCs).

In summary, an LLC/will combination provides asset protection while you are alive, management if you become disabled, and a streamlined transfer process at your death.  LLCs may be placed in trust to provide even more benefits, i.e., keep a beneficiary from selling all the assets.  If you are asking yourself “why hasn’t my attorney or financial advisor told me all of this?” you are not alone.

For more information on creating or modifying your plan to maximize your affairs, contact David Disraeli at 512-464-1110 or book a call here: