A family limited liability corporation, or family LLC, is a form of business organization that families can use to manage their wealth.
A family LLC is also an estate planning device that can accomplish several goals, including avoiding probate and minimizing any applicable gift and estate taxes.
When set up correctly, family LLCs offer important estate planning benefits
Like any other LLC, a family LLC must be properly organized and maintained.
Usually, a family member who wants to pass on their wealth portfolios to their closest relatives will set up the LLC and name their loved one as the LLC’s members.
While they are able, the creator of the LLC typically serves as the managing member of the LLC, meaning they control the day-to-day affairs of the business.
When properly set up and maintained, a family LLC can protect wealth from creditors. As a business entity, the LLC offers liability protection so that would-be creditors may find themselves unable to touch family assets. LLCs can also reduce taxes, especially in the case or larger estates.
Like a living trust, a family LLC also gives New Yorkers control over their assets while they are still alive and healthy and allows for an efficient and private transfer of wealth when that time comes. Also, like trusts, LLCs do not pass through the probate process.
The costs in terms of time and money in maintaining an LLC is a possible drawback. Depending on both the size of a person’s estate and other circumstances, there may be more cost-effective ways to handle estate planning.
New York residents should evaluate if an LLC is right for them
A person who thinks a family LLC might be the right estate planning device for them should make sure they understand this option fully and compare it to other alternatives.
If they decide to go forward with it, they will need to be certain to attend to all the financial and legal details.
