Integrating an LLC with your Trust

The standard living trust cannot be considered an asset protection vehicle. Rather, its purpose is to dictate where and how your estate will be distributed upon your passing and to avoid probate court and the time and cost associated with it.

While the Personal Asset TrustSM can provide the flexible level of asset protection that may be suitable for your assets, it cannot provide this protection until your passing due to the nature of the trust and how current estate law operates. For some clients, they require a level of asset protection similar to that of the Personal Asset TrustSM, but they need it during their lifetime. For that client, the formation of a Limited Liability Company, or LLC, is likely the best option available.

While the formation of an LLC is not particularly difficult, forming an LLC that both sufficiently meets your needs and, perhaps more importantly, is set up properly as so it can be integrated into either your current estate plan or an estate plan you plan to set up in the future. Among the requirements for forming an LLC in California, the drafting of the operating agreement is essential for this purpose. The operating agreement provides:

• How the LLC is managed
• The ownership of the LLC
• How the LLC will raise capital
• How profits and losses will be allocated
• How membership can change, such as upon death of the owners
• How the LLC can be terminated

These key components are integral in ensuring your LLC can interact with your trust and estate plan the way you intend it to while retaining its asset separating properties so you can protect the assets from creditors. In drafting your operating agreement and integrating it with your trust, you want an attorney that is experienced in both business law and estate planning to advise you and make sure the LLC will function properly both as a business entity and estate plan vehicle.