LLCs for Estate Planning

For many years, family limited liability companies (LLCs) and family limited partnerships (FLPs) were used for transferring wealth to family members in a way that reduced estate tax through valuation discounts. Increased tax court challenges by the IRS and the significant increase in the estate tax exemption in 2013 with portability of the exemption for married persons have made this estate planning technique less useful for tax purposes. However, many non-tax reasons make LLCs and FLPs a useful estate planning tool, particularly where business interests and business assets are involved. These reasons include development of a business succession plan, development of a plan to consolidate business and investment assets, placement of real estate and other assets requiring active management under the control of a professional manager, gifting periodic interests in the LLC to children in order to slowly integrate children into the management of the parents’ business, and protection of assets from creditors. For example, we have created family LLCs for families owning rental real estate in order to provide limited liability for the owners and to provide a vehicle for centralized management and operating rules in case of the death of the parents. We can help you decide whether an LLC for estate planning is right for you and your family.