Place LLC interest in living trust?

Question

Hey BP,

Relatively small time investor with 3 properties in an LLC that is member managed by a partner and me.  I'm setting up a living revocable trust for my wife and I.  She is not a member of the LLC (not for any financial reason, she just isn't involved in the business at all).

Can any legal or tax experts weigh in on whether to place my interest in the LLC into the trust?
If we expand more, we plan to form additional LLCs once the equity is greater than $500K. Hassle to keep putting additional LLC interest into the trust?

Thanks!

Ryan Seib · Answer

A trust is really for planning your estate after death. If you want to pass on the LLC in accordance with your wishes and the trust spells that out, there is usually no good reason not to use the trust for what it is intended for.

Megan Templeton · Answer

Hello @Wilson LiuWould recommend holding your interest in the LLC. It will allow your assets to flow through to your estate upon your passing and can provide tax benefits. Additionally, there may be better options than setting up new LLCs in the future such as  a series LLC. I'll recommend chatting with an advisor

Thanks,

-Megan

Wilson Liu · Answer

Thanks for the quick replies so far.  Are there any practical implications to putting the LLC interest into the trust?  Changes in the way we would operate?  Would it make it easier for transferring the assets upon death compare to leaving it out of trust?

Seidy Lasker · Answer

@Ashish Acharya

If the beneficiary transfers assets from the trust to their name, they get taxed as long term capital gains?? And then they no longer have to file 1041s??

Seidy Lasker · Answer

@Ashish Acharya

Any trust income is reported on the personal return?? And then when the grantor dies, the beneficiary of the trust files a final 1040 and 1041 every year the Trust generates income?? Is that how it works?