Funding Your Revocable Trust – Business Interests

You’ve heard the term “funding your trust” and we’ve discussed transferring your bank and investment accounts, as well as your real property. If you are a business owner, then this article is for you. Here, we take a look at business interests and the importance of having those interests placed in trust.

Limited Liability Companies (“LLCs”)

Like other assets, the failure to transfer your ownership interest in a LLC to your trust can leave your estate open to probate at your passing. While there are various ways for ownership interests to transfer automatically on the death of a member, the best way to avoid probate is to transfer that ownership interest into your revocable living trust.

The simplest way to achieve this is to add the revocable trust as a member of a LLC. The transfer of an LLC interest to a trust may require the approval of other members or managers within the LLC, but such consent is typically granted by the LLC after it has reviewed the Certificate of Trust and the appropriate assignment documents have been executed.

Just as with bank accounts and real property, as you acquire new LLC interest(s), simply provide a copy of your Certificate of Trust and instruct the LLC that you wish to hold title (as a member of the LLC) in the name of your trust. It is good practice to leave LLC managers in the name of individuals not revocable trusts.

Other Business Interests

Any other business interest or sole proprietorship can generally be transferred to trust by an “Assignment of Business Interest”. This document assigns all property/assets owned in the name of the business, for the purpose of determining title, into your trust so that these interests will avoid probate. However, there may be specific issues with the transfer of interests in businesses (such as permits and licenses) and thus it is necessary that they be reviewed in detail before making the transfer. Accordingly, it is recommended that you obtain legal and tax advice prior to transferring any business interest into your trust.

If you have a business interest in a franchise, any transfer of such interest to your trust will probably require the consent of the franchisor. Typically, such consent will be granted by the franchisor after it has reviewed the Certificate of Trust and the appropriate assignment documents have been executed.

Do you have additional questions about funding your revocable trust? Schedule a free 30-minute estate planning consultation today and let us provide you with the tools you need to reach your estate planning goals.

This article is provided as a public service by the Law Offices of C. David Martinez, PLLC. While the information on this site is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.