Pursuing Peace Of Mind For You And Your Family

Should you use an LLC or trust to pass on your estate?

Limited liability companies are trusts that protect assets and ensure that an estate ends up in the hands of the intended beneficiaries. Both are valuable options, but each has unique advantages that work in different situations.

According to SmartAsset Advisors, an LLC has a separate existence from its owners and is a legal entity. Trusts maintain assets and transfer them to the intended beneficiaries when the person dies.

When an LLC may be beneficial

LLCs are a simpler version of a corporation and are more relevant to businesses. They pass dividends directly to owners to avoid the double taxation many corporations face. They can also pass a business on to an heir rather than sending the business through probate. This allows for minimal disruption to day-to-day operations and ensures that the transition is seamless.

When to use a trust

A trust is a personal entity rather than a business one. There is no requirement to file government documents, and trusts can hold ownership interests in LLCs, real estate and securities, cash and bank accounts.

Trusts also allow for the owner to avoid probate. A trustee oversees the trust with detailed instructions from the owner about how distribution works when they die. Those who choose a will have full control over the assets within the trust and can revoke it whenever necessary.

When it comes to estate planning, there are many benefits to both trusts and LLCs, particularly if there is a family business. Those with larger estates and businesses often benefit from a mixed bag of tools when designing a will.