Redding, California, Law Blog

Can I create an LLC for estate planning advantages?

On Behalf of | Jan 27, 2023 | ESTATE PLANNING - Estate Planning

Many entrepreneurs know that setting up their businesses as a limited liability corporation, or LLC, can provide significant tax advantages while also protecting assets. But did you know that structuring your family business in California as an LLC is a valuable estate planning tool that can help pass your assets to family members that controls distribution and reduces the estate tax bill?

How a family LLC can provide asset protection in an estate

As a business owner, you most likely already know how an LLC can help you during tax time while protecting your personal assets from any debts the business may incur. The estate planning aspect of an LLC is frequently overlooked. Family LLCs provide several distinct advantages, including:

  • Controlling asset distribution among family members
  • Reducing the size of an estate by essentially giving away some of the owner’s stake in the business
  • Avoiding gift taxes as the transfer of an LLC after an owner’s death does not apply
  • Keeps all assets within the family, if desired

Estate taxes apply on the transfer of property after your death if your property is valued at $11.7 million or more. Gift taxes also have a current lifetime cap of $11.7, dropping to $5.5 million in 2026. An LLC creation can help avoid both.

Properly structuring your family LLC

Your LLC agreement is legally binding once all the members have signed it. For an LLC to be a proper estate planning tool, it must be carefully crafted before everyone signs on the dotted line. If you plan to start a family business, consider its structure carefully before settling on one.

Obtaining the proper business structure will make estate planning easier. If you already have an established business structure, you can use other methods to help protect business assets.