How to Transfer an LLC Into a Trust in Georgia
If you own an interest in a limited liability company, commonly known as an LLC, transferring the LLC into a carefully drafted trust as part of your estate plan may provide substantial benefits. But before you make the decision, it is essential to get advice and assistance from an experienced estate planning attorney.
Putting an LLC Into a Trust
Before you can put anything into a trust — including an LLC — you need to create the trust. Creating a trust requires help from a knowledgeable estate planning lawyer. You should never try to create a trust on your own with a form or online service. Doing so poses substantial financial and personal risks.
Your lawyer reviews the benefits of putting your LLC into a trust, makes certain the trust is consistent with your business and estate planning goals, and helps you determine the proper kind of trust to use. Then, your attorney meticulously drafts the trust document to coincide with your goals and wishes. Executing the document establishes the trust. However, the trust is not operational until you fund it by transferring assets, including the LLC, into the trust.
Types of Trusts
There are many different types of trusts, each one designed to accomplish specific goals. All trusts are either revocable or irrevocable and living (inter vivos) or testamentary.
A revocable trust can be changed or terminated at any time. In addition, the grantor or settlor (person creating the trust) maintains full control over assets placed in a revocable trust. In contrast, an irrevocable trust may include limitations on control over the assets. However, an irrevocable trust properly drafted with assistance from an experienced trust attorney can allow the grantor to retain some control over assets placed in the trust. Georgia law allows mechanisms for the trust to be changed or terminated under certain circumstances. Further, a carefully drafted irrevocable trust provides tax basis adjustment for real estate upon the death of the grantor.
A living or inter vivos trust is one created during the grantor’s lifetime. A testamentary trust takes effect on the grantor’s death. When you create a trust, it is essential to understand what type of trust you create (whether it is revocable or irrevocable, and whether it is living or testamentary) and how the trust impacts your control over assets you place in the trust. Your trust attorney makes certain that you understand those important concerns before you make the decision to establish a trust.
Benefits of Transferring an LLC Into a Trust
Asset protection is one of the primary benefits of putting an LLC into a trust. While an LLC as the legal structure for a business does provide specific liability protection for the LLC members (owners), transferring the LLC into a trust can provide additional asset protection, as long as the trust is properly drafted and funded.
Placing an LLC into a trust during your lifetime can avoid probate, saving time and expenses in transferring the LLC to beneficiaries. Avoiding probate also maintains the financial privacy of your estate. Assets in a trust pass to beneficiaries more expeditiously, efficiently, and without the public attention that accompanies probate.
A trust can also outline the terms for continuity and succession of the LLC, including in the event of incapacity, which is particularly important for small and family-owned businesses. The terms of the trust can address distribution and management of the LLC, including who manages the business and how profits are distributed. In some cases, putting an LLC into a trust also may provide tax planning advantages.
The Process of Putting an LLC Into a Trust
A specific process must be followed for putting an LLC into a trust. After the trust is established, the grantor must follow specific steps to transfer the grantor’s ownership interest in the LLC into the trust. The LLC’s operating agreement may contain rules that apply to transfer of membership interests, so it is important to check the LLC documents before starting the transfer.
If the LLC has multiple owners (members), the operating agreement may require the consent of other members to the transfer. The transfer also may require amendments to the operating agreement and other LLC documents. Your attorney guides you through completing all of these requirements and, if necessary, accomplishing any necessary revisions and filings of the LLC documents.
The decision to transfer an LLC into a trust should only be made after consultation and discussion with an experienced trust and estate planning attorney, to ensure a full understanding of the practical and legal implications and consequences of the transfer.
Talk With an Experienced Georgia Estate Planning and Trust Attorney
Our Cartersville estate planning practice at Asset Protection & Elder Law of Georgia focuses on helping clients, including businesses, identify and accomplish their estate planning goals by using the best approach for their personal and financial circumstances. If you own an LLC, helping you determine whether creation of a trust and transfer of the LLC can provide you with meaningful benefits is an important part of our legal services. If a trust would be beneficial, we can help you establish the right type of trust to address your specific needs.
We serve clients throughout the communities northwest of Atlanta, including in Bartow County, Cobb County, Cherokee County, Gordon County, Floyd County and Paulding County. To schedule a consultation, call us at (770) 382-0984 or contact us through our online form.
