Safeguarding Your Assets and Legacy: The Power of Revocable Living Trusts and LLCs
Working hard for your wealth is important. Equally important is protecting your assets and ensuring they are passed down according to your wishes. Most of you have probably heard about Revocable Living Trusts and LLCs. Here’s why you should consider integrating these tools into your estate planning strategy.
Revocable Living Trusts: A Roadmap for your Personal Assets.
A Revocable Living Trust (or “RLT”) allows you to wear multiple hats during your lifetime. You serve as the “Trustee”, or the person in charge of following the rules of the Trust and the “Beneficiary”, or the person who receives the benefits of the Trust property. When you die, you can choose to have the Trust continue with new Trustee(s) and Beneficiaries, or you can simply choose to have all of your property given to your loved ones. Trusts are no longer for rich socialites. They are quite popular amongst ordinary people and this is why:
Control and Flexibility: As the name suggests, RLTs can be revoked or altered at any time during your lifetime. This means that as circumstances in your life change, so can the rules of the Trust. You can choose to change future beneficiaries and/or Trustees whenever you want. You can designate your trust as a beneficiary to other payable on death accounts. Your RLT can have ownership interests in LLCs or you can purchase new properties outright in the name of the RLT.
Privacy: Since trusts do not go through probate, the details of your estate remain out of public records, keeping your financial affairs confidential.
Incapacity Planning: To become incapacitated means you lose the capacity to make decisions for yourself. Incapacitation is almost always unexpected and can cause major problems. RLTs should have provisions that in the event of your incapacitation a successor Trustee shall be appointed. Note: we also always recommend that a trusted person be designated as your agent through a Power of Attorney.
LLCs: Protecting Your Assets
LLC stands for Limited Liability Company and it is a great entity for ownership of assets and even business operations (so long as the business operation uses the correct tax designation).
Liability Protection: The primary thing people think of with LLCs is the separation between you and your business or investment. In New York there are certain limitations on the extent to which your LLC interests are protected from your personal liability. However, an LLC does provide an extra layer of protection that a creditor will have to work through to gain access to your assets.
Tax Flexibility: as a default, LLCs are treated for taxation as a pass-through entity, meaning the LLC itself does not pay income taxes; instead, profits or losses pass through to your personal tax return. An LLC can also choose to be treated for tax purposes as an S-Corporation or a C-Corporation. The proper designation can save you thousands and even tens of thousands of dollars in taxes.
Combining Trusts and LLCs for Comprehensive Planning
Imagine this scenario: You own a rental property (housed in an LLC for liability protection) and your personal home (managed through a Revocable Living Trust). Both assets are held separately so if anyone sues you or your business your assets will be siloed in different entities that are both managed by you. And people snooping on public record websites will not see your name as the owner of your assets.
The use of a Revocable Living Trust for personal property and an LLC for investment assets can offer peace of mind, flexibility, privacy, and efficiency. If you’re considering how to best protect your legacy in New York, I encourage you to explore how these tools can be tailored to your unique situation.
Interested in learning more or need help setting up your estate plan? Reach out for a consultation to discuss how we can assist in crafting your personalized legacy strategy.
