If you’re an adult in the United States, it’s a given that you’re at least somewhat familiar with corporations. And there’s a pretty good chance that you’ve seen at least one business name that had the LLC designation after it – indicating that the enterprise is organized as a Limited Liability Company. For the last two decades in Indiana, the LLC structure has been used by businesses in the state to protect owners’ personal assets from liability that their companies might incur. What you may not realize, however, is just how important the LLC corporate structure can be for your estate planning needs.
Companies have good reason to limit liability and protect those with an ownership interest in the enterprise. The entrepreneur who fails to take advantage of liability-limiting business structures runs the risk of putting his own personal assets at risk of loss due to bankruptcy, lawsuits, or other misfortunes. The LLC structure enables those business owners to shield their own personal assets from that liability, protecting them from the company’s losses and debts. It also provides greater control over tax concerns, and can be an invaluable tool for helping some families avoid estate tax implications and accomplish other estate planning goals.
That emphasis on estate planning has taken on greater importance in recent years, as many individuals are discovering that estate plans are not just for the rich. If you own any assets, then you need some type of estate plan in place to protect your wealth, grow it over time, and ensure that it passes to the right heirs when you die. That plan could be as simple as a Last Will and Testament supported by powers of attorney to protect your interests during any period of incapacity, or it could involve trusts and other more complex planning tools. If you own a business, though, the LLC may be one of the most important tools you can use to protect your estate.
Advantages Offered for Estate Planning
LLCs are especially important for family-owned businesses, as they can provide estate planning advantages in a number of key areas of concern. If you have a business and haven’t yet considered organizing it as a Limited Liability Company, just consider these potential benefits that an LLC can offer.
- LLC Assets Are Not Considered Personal Assets
Why you have your business organized as an LLC, its assets are owned by the company, and are not owned by any individual. That can offer a number of important benefits for your estate planning endeavors. First, when you die, those assets will not need to pass through probate since the LLC can be transferred to heirs in a number of different ways, including revocable trust provisions and the use of joint tenancy.
For people with larger estate holdings and substantial wealth, the LLC can provide a way to minimize exposure to estate tax ramifications. The assets owned by the LLC are not counted as part of the estate for those tax purposes, which can help many Indiana residents avoid the estate tax altogether – or at least reduce the amount of tax the estate owes when they die.
- Assets Are Protected if Incapacity Occurs
Possible future incapacity is a serious concern that all Americans should take seriously. After all, if you don’t have a plan for financial decision-making in the event that you suffer an incapacitating injury or illness, your business and financial interests could be seriously disrupted as your loved ones wait for a court to appoint a guardian to act in your stead. While there are legal tools like a power of attorney that can ensure that you have an agent to make decisions for you, your business can accomplish that same result through the inclusion of certain provisions within the LLC operating agreement.
- LLC Ownership Transfers Can Simplify Gifting Strategies
Gifting is a big part of many people’s estate planning strategies, but that entire process can be complex for many individuals to manage. Your LLC can include ownership transfer provisions within its controlling documents that provide a simplified process for transferring portions of ownership to others in an incremental way. That can allow you to give the business to an heir over time, while avoiding capital gains triggers or other tax complications.
Why it Matters
How you organize your company can be of critical importance for estate planning. For many people, things like life insurance policies and business interests often get neglected when they are considering the need for comprehensive planning – and that can lead to disastrous and unforeseen consequences later on in life. Your heirs may someday find that your death leaves behind an estate worth far more than you had originally thought, once policy payouts and business valuations are factored into the equation. As a result, that estate may end up being subject to lengthy and complex probate proceedings or could even owe taxes far beyond anyone’s expectations.
It can be even worse if you fail to include your business planning within your estate plan, since the strategies used to accomplish your planning goals can be disrupted when you fail to properly coordinate all of your financial interests. You could end up undoing all of your estate planning efforts and seriously disrupt your own efforts to leave behind a legacy worthy of your life’s work.
At Frank & Kraft, Attorneys at Law, our business and estate planning experts can help ensure that you get the assistance you need to properly protect your assets and interests. We work with clients just like you every day to develop comprehensive estate plans that can survive the test of time and the rigors of life’s ever-changing circumstances. With our guidance and help, you can enjoy the full range of benefits that a Limited Liability Company can provide, in a way that perfectly complements your broader estate planning efforts. If you’d like to learn more about how we can assist you with your LLC and estate plan needs, call (317) 684-1100 today, or visit us at our website.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.