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How do you use an LLC for estate planning in California?

On Behalf of | Feb 14, 2023 | Estate Planning |

California business owners are familiar with an LLC is and how it can help their business. A limited liability company (LLC) is a business structure that blends aspects of partnerships and corporations.

Turning your business into an LLC gives you a lot of legal and financial advantages when managing your business. However, an LLC has other advantages.

Using an LLC for estate planning

You can create a family LLC and assign various assets to the LLC – similar to stock options or business materials. From there, you can add your beneficiaries as shareholders with one or both parents acting as the main owners of the LLC.

As the main proprietors, the parent (or parents) can control how the assets are distributed to the shareholders – their beneficiaries. As long as the other family members don’t have voting power, the parents can control how the estate is passed down.

Benefits of using an LLC for estate planning

Using an LLC for your estate plan not only gives you more control, but it gives you more flexibility than traditional estate planning tools like trusts. Assets can also be transferred to beneficiaries for only up to 40 percent of their market value.

It’s also a great way to get around gift and estate taxes, especially if you’re dealing with a high-value estate. Because the value of the assets is discounted, your estate taxes will be lower.

While it might seem more convoluted, setting up an LLC is safer than just gifting your family the assets. Gift taxes kick in after $16,000 for an individual and can be up to 40 percent. If structured correctly, the LLC can be used by your family for years after you die.