Limited Liability Company Benefits
The use of a Limited Liability Company (LLC) may be the premier planning strategy for reducing estate and gift tax liability. The following is a summary of some of the benefits of using an LLC.
- By being the managing member, you can maintain control of the LLC and distributions to the members.
- When parents make gifts of LLC interests, they are entitled to discount the value of the transferred interest for gift tax purposes.
- LLC interests owned by the parents at death have reduced values for estate tax purposes (through discounting), thereby resulting in lower estate taxes.
- Your children do not have to be direct members in the LLC; rather, you can establish irrevocable trusts (including Heritage Trusts) for your children and make the trusts the non-managing members, with your children as beneficiaries of the trusts.
- By discounting the value of LLC interests transferred by parents, this can maximize the amount of assets that can be placed in Heritage Trusts for children.
- An LLC adds simplicity toward administration of assets since those assets can be held in one entity, rather than having many assets owned separately.
- An LLC interest is generally exempt from the creditors of the members.
- An LLC allows a shifting of income from the parents to the children through LLC distributions.
- An LLC does not pay income tax; rather, the tax consequences flow through to the members.
- An LLC can own assets such as stocks, bonds and other investments assets.