Forming a Simple Trust

[Kevin D.]

Four of my properties (8 units) are in one LLC and my accountant advised me that being a single member of the disregarded entity is not the best idea. I talked to my attorney and he is forming a simple trust where I will be the trustee and my kids will be the beneficiaries. The LLC is only granting 5% ownership to the trust, so we're not talking huge money here. I believe that as long as each minor child receives less than $1,050/year in income, they will not have to pay taxes or file a return.

This strategy seems to be killing several birds with one stone: 1. no longer a disregarded entity, 2. potential plaintiffs could not contend that the LLC and me are the same thing, 3. being able to distribute $ to my kids tax free (with limits).

There are some fees to form the trust and annual tax prep, but they are small relative to the advantages.  Does anyone use this strategy?  If so, am I overlooking something?  Thanks!