Say, for instance, that you and/or your spouse manage a small business. With this, you may have distributed shares to your children and/or grandchildren. In this case, you may have what is considered a family limited liability company (LLC). You must understand that a family LLC is an effective estate planning tool that, if properly established, may greatly work to the advantage of your beneficiaries. Follow along to find out how to use your family LLC to benefit your estate plan and how a proficient Broward County estate lawyer at The Probate Lawyers can help you properly execute this tactic.
How do I set up a family LLC?
Before all else, you must confirm that your small business is legally set up as a family LLC as per Florida law. Of note, the Internal Revenue Service (IRS) may treat a family LLC the same as a standard LLC. However, the main difference between the two is that a family LLC exclusively involves members who are related by blood or marriage. In addition, a family LLC is almost always formed specifically with estate planning purposes in mind.
Without further ado, you must follow the below steps to lawfully establish a family LLC in the state of Florida:
- You must transfer your assets to the family LLC (i.e., cash from your personal bank accounts, the title and structures built on your property, and your high-value personal possessions).
- You must translate the market value of your assets into units of value (i.e., shares) within your family LLC.
- You must assign ownership over these units of value to your children, grandchildren, and/or any other relatives by blood or marriage whom you wish to appoint as your beneficiaries.
In what ways can I use a family LLC to benefit my estate plan?
The main benefit of using a family LLC for estate planning purposes is that the value of units may be discounted up to 40 percent of their market value. Meaning that you may gift your appointed beneficiaries with a higher value of assets before having to pay a gift tax. For example, if your company’s units are valued at $1,000 each, then a 40 percent discount may bring them down to $600 each. The IRS enforces a gift tax cap of $17,000 annually. So instead of only being able to transfer 17 shares (worth $17,000), you may be able to transfer up to 28 shares (worth $28,000).
Additional ways in which your family LLC may benefit your estate plan are as follows:
- You may reduce the overall value of your estate, thereby reducing your taxable estate.
- You may give your beneficiaries their inheritances in advance, all while lowering their tax burden in their personal income taxes.
- You may ensure the seamless distribution of assets, titled in your company’s name, to your appointed beneficiaries upon your unfortunate passing.
This is all to say that, before you move any further in your planning, you must consult a talented Broward County estate lawyer. So please reach out to The Probate Lawyers today.
