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LLC Owned By Trust Of Different Types (2024)

Max Smith

Reading Time: 6 minutes

Are you thinking of enjoying benefits from both the LLC and the trust? Then, an easy answer is to get an LLC owned by Trust. This probate powerhouse will save you and your beneficiary from many headaches in the future.

However, there are different types of trusts to form, each slightly different from the other. You can choose one specific type of trust that will meet your expectations and goals. 

So, without wasting any time, let’s jump right into our discussion. 

Among all the things to notice for a trust-owned LLC, let’s start with whether or not an LLC can be in a trust.

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Typically, an LLC cannot ‘be in a trust,” not if you mean being an asset in a trust. At least, it cannot be directly.

The explanation behind this reason is:

  • A trust is a legal arrangement to hold assets – for example, a bank account or a part of real estate.
  • An LLC is a legal entity, not an asset. It is separate from its owners.
  • Thus, an LLC cannot “be in a trust,” as it is not an asset but an entity.

So, can an LLC be owned by a trust? Of course, a trust can own an LLC, whether revocable or irrevocable. This means the trust can hold the LLC’s membership interest. 

But is there only one type of trust-owned LLC, or are there different types? Let’s find out!

Different Types of LLC Owned by Trusts

Is an LLC owned by a trust, a disregarded entity? Yes! In fact, owning LLCs through trusts is a typical method of business ownership. Moreover, a trust owns several types of LLCs. Some of them are discussed below:

1. Revocable Living Trust-Owned LLC

A revocable trust, or an inter vivos trust, is a type of legal agreement. In this case, you, as the grantor, set up a trust to hold assets or investments. You will keep control over the trust during your lifetime and can dictate the distribution of the assets after your death.

Besides, you can change, add, or revoke the trust anytime. Moreover, you can even buy or sell the LLC assets as you see fit. Furthermore, you can designate your successor trustee if you cannot run the LLC.

Lastly, you should choose this option if you want to set up a trust for estate planning purposes. Your beneficiaries will receive the LLC assets more quickly and privately, without probate. However, they will not have any creditor protection, nor will they have any significant tax advantages.

2. Irrevocable Trust-Owned LLC

This legal arrangement is the opposite of a revocable trust. As the grantor, you will set up the trust to hold LLC assets, but you will not be able to revoke the trust once it is established.

This arrangement means you have relinquished your control over the LLC. Only trust is in control now. All of the LLC’s activities will be on the trust’s terms. For this, they will be protected from creditors and personal liabilities.

3. Family Trust-Owned LLC

As the name suggests, a family trust owns an LLC (Limited Liability Company). This trust is established for the benefit of family members. When it becomes the legal owner of an LLC, it controls the activities that are beneficial to it.

Another advantage is management, succession, and estate planning with asset protection. It is centralized, meaning the ultimate authority is in the trustee’s hands. They align the LLC’s objective with the family trust’s.

4. Special Purpose Trust-Owned LLC

A special-purpose trust is a legal structure that serves a specific purpose. It can be for funding education, giving charity, engaging in business, or protecting assets.

When this trust becomes the owner of an LLC, that LLC’s goals and activities get tailored to the trust’s purpose.

5. Asset Protection Trust-Owned LLC

An LLC was established to protect assets. But when an asset protection trust owns it, the protection is boosted. This trust safeguards the assets further, especially when creditors try to pierce the corporate veil.

This type of trust works better in jurisdictions known as “asset protection havens,” such as Nevada, Delaware, or Wyoming. These jurisdictions have solid asset-protecting laws that promote increased asset safety.

6. Dynasty Trust-Owned LLC

A dynasty trust is designed to pass wealth across several generations, helping to minimize estate taxes. When combined with an LLC structure, it becomes efficient for wealth protection.

It differs from a family trust-owned LLC, which benefits current family members, such as spouses, children, or relatives. In contrast, a dynasty trust-owned LLC lasts in perpetuity. It protects assets and passes them down safely for future descendants.

7. IRA-Owned LLC (Checkbook IRA)

Although not a traditional way, few people choose IRAs to invest in LLCs. This is also known as a “checkbook IRA” or a “self-directed IRA LLC.” The IRA owns the LLC, whereas the IRA holder controls the LLC’s assets.

You can let an IRA or individual retirement account become the sole owner of the LLC for several reasons, such as checkbook control over retirement funds or a wide selection of investment options. 

Furthermore, there is also a living trust that you can use to own your LLC. Are you confused about it? Then, let’s clear up any confusion in the next section!!

Can a Living Trust Own an LLC?

Yes, a living trust can own an LLC.

It is a common strategy. When the grantor wants protected assets with privacy and some estate planning, they usually take this step. Moreover, planning for incapacity is another reason to do this.

This living trust can be revocable or irrevocable. Both will help your beneficiary avoid probate. A revocable trust allows you to control your LLC, but an irrevocable trust will give your LLC asset stronger protection.

Conclusion

In the end, an LLC owned by trust is possible. In fact, you have the opportunity to create various trusts to own your LLC. However, you must analyze them and choose the best option for your future goals. 

Besides, a living trust can also own an LLC. You just need to choose one type of trust, fill out the necessary documents, and sign the contract to receive the benefits. Undoubtedly, the benefits of trust-owning LLC are really effective for your LLC and the heir of your LLC interest. 

Lastly, if you are unsure which is best suited for your objectives, we suggest you seek professional advice.

Key Points

Below are the discussion’s key points:

  • No, an LLC cannot “be in a trust” because trusts only hold assets, and LLCs are not assets but entities. However, a trust can absolutely own an LLC.
  • Different Types of LLCs Owned by Trust:
    • Revocable Living Trust-Owned LLC: Grantors can change, add, or revoke the trust at any time.
    • Irrevocable Trust-Owned LLC: The grantor cannot revoke the trust once established.
    • Family Trust-Owned LLC: This option is better for centralized management.
    • Particular Purpose Trust-Owned LLC: This trust serves a specific purpose.
    • Asset Protection Trust-Owned LLC: This trust is advantageous in jurisdictions known as “asset protection havens.”
    • Dynasty Trust-Owned LLC: You can choose this to pass wealth across several generations.
    • IRA-Owned LLC (Checkbook IRA): People with retirement plans choose this option.
  • A living trust can own an LLC, be it revocable or irrevocable.

Frequently Asked Questions

Can a trust own an LLC?

Yes, an LLC can be owned by a trust. This means that the trust can have the LLC’s membership interest. There is no specific state or federal law against this arrangement.

Can an irrevocable trust own an LLC?

Yes! An irrevocable trust can own an LLC. It’s part of the estate planning process. As a result, the business interest is protected from liability risks and also passes smoothly to its heirs. 

Can a revocable living trust own an LLC?

Of course! However, if your trust agreement prevents LLC ownership, then it is not possible. Otherwise, there are no restrictions, and your trust can easily own an LLC. 

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


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