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Family LLC Estate Planning In Texas

LLC For Estate Planning In TX

A family LLC is a tool for estate planning that many people do not often consider. Aside from being a hybrid legal entity that benefits small business owners, a Family LLC can be used to transfer assets to family members without them having to pay estate taxes or gift taxes when you die. You can also use it to protect your assets when you are alive.

Always consult an experienced estate planning law firm before you choose a family LLC as an estate planning tool.

Estate Planning With Family LLC

What Is A Family LLC

You can use a family LLC to protect its members or owners from lawsuits and creditors.  That means that creditors and other claimants cannot take your home, motor vehicles, and other personal assets if you are a member of a family LLC.  It also reduces the amount of taxes heirs have to pay for the assets they inherit.

You can also use it to distribute assets to family members when you are still alive without paying gift taxes.  In addition, you do not lose your ability to control your assets with a family LLC.

How A Family LLC Works For Estate Planning

Family Property LLC In TX

Family LLCThe family LLC management is normally left in the hands of the parents while the children are shareholders of the LLC assets. So, only the parents can distribute, sell or trade the assets, and the children cannot sell their shares, transfer membership in the company or even leave the company.  Children or grandchildren also can’t vote on any issue concerning the family LLC.

You have to pay taxes on the shares you give your children or grandchildren but you also get tax benefits for giving more.  The value of units you transfer to younger members of the family LLC can be discounted by up to 40% of their market value leading to a lower tax burden.  At the same time, the overall value of your estate reduces as you transfer units meaning that your personal income taxes will reduce.

You can also gift units with higher value than the allowed gift limit. Talk to a trusted lawyer for all the details.

Other Estate Planning Methods

Family LLC Vs Trust

Estate planning means planning how your estate will be divided when you die or become incapacitated.  Part of that plan may include deciding who will be in charge of making decisions about your finances and healthcare when you are no longer able to.  Below are some estate planning techniques:

  • Writing a Will:  A Will contains instructions on how you’re your property and the custody of your children should be handled when you die. A  Will also names an executor of your estate or a trustee for a trust that activates when you die.
  • Trusts: You can form a living trust when you are alive and transfer assets to the trust. These assets will not be subject to taxes or claims because they will not go through probate.
  • Life Insurance:  Signing up for life insurance means that any death taxes and expenses that emerge after you die will not be paid for using the assets you live behind for your family. Life insurance can also fund retirement plans.