Idaho Law Blog
By Lane V. Erickson, Attorney
Most people don’t know that an Idaho LLC is a wonderful way to help with estate planning whenever a family business exists. LLC is the abbreviation used when talking about a limited liability company. A limited liability company is a hybrid between a Family Partnership and a formal Corporation. Essentially, it provides all the flexibility of a partnership with all the corporate protections offered by a regular corporation. Here are the three main benefits of using an Idaho LLC in your Idaho Estate Planning whenever a family business exists.
1. Ownership of Business Assets are In the LLC
Perhaps the most important benefit of having an Idaho LLC involved in a family business is that all of the assets of the business are owned by the LLC and not by any individual personally. What this means when it comes to Idaho Estate Planning is that those assets will not be included in any Idaho Probate or other proceedings after an individual owner passes away.
If a person has a large estate then the assets of the business will not be counted against the individual’s estate. Currently, federal law provides a $5.4 million exemption to each individual before and estate taxes assessed. Any value of the estate above the $5.4 million will be taxed at a 40% rate. By having assets owned by an LLC the value of those assets are not counted against an individual’s estate.
2. Transfer of LLC Ownership Simplifies Gifting
The second benefit of having an LLC as part of your estate planning is that transferring ownership interest in an LLC simplifies the gifting process to family members. When an LLC is created there has to be at least one or more owners of the LLC. If there is more than one owner, these owners are given a percentage of ownership. The controlling documents of the LLC, which include an operating agreement, can provide a mechanism for a transfer of ownership interests between owners.
In simple terms what this means is that a person creating an LLC for their family business can create a program or process whereby the ownership of the LLC will transfer incrementally to other family members during their lifetime. This is a way of transferring ownership of the business and its assets without creating a triggering event which could result in capital gains taxes and/or other types of taxes.
3. Protection of Assets in the Event of Incapacity
An additional benefit of having an LLC in a family operated business is that there are automatic protections in place if any member of the LLC becomes incapacitated. Without an LLC, incapacity will result in the use of either a Durable Power of Attorney, or a guardianship appointment. With either of these appointments or Powers there is an unchecked ability of a person to handle the assets of another person. However, with an LLC, the operating agreement again acts as a protection for the operation of the family business.
There are many reasons why having an Idaho LLC as part of your Idaho Estate Planning is a good idea. Three of these reasons are listed above. However, if you have any questions, please feel free to contact us about creating an Idaho LLC for your family business.
Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Estate Planning attorneys in Idaho. You can also email Lane Erickson directly at lve@racinelaw.net. We will answer your Idaho Estate Planning questions and will help you solve your personal estate planning needs.