Not sure which one is right for you? A family trust and a limited liability company, or LLC, are both created under state estate planning vs living trust, but they are two very different legal vehicles. People contribute assets to these legal vehicles to obtain advantages such as asset protection, avoidance of probate and preferential tax treatment. Both vehicles offer distinct advantages and disadvantages.
Family Trusts A trust allows you to put your assets under the care of a trustee you name and to designate beneficiaries to receive distributions of trust assets under terms you spell out in a trust agreement. In a family trust, family members are named as beneficiaries. A trust can be either revocable or irrevocable. If it is revocable, you can amend or dissolve it at any time. LLCs An LLC is a legal entity that enjoys the limited liability of a corporation along with the operational and managerial flexibility of a partnership.
You can even form a one-person LLC. Although the LLC is designed for operating a business, you can form an LLC and then contribute property to it, which then legally belongs to the LLC. Nevertheless, as long as you own the LLC, you indirectly own its property. Formation You form a trust by creating and signing a trust document that names a trustee and at least one beneficiary, transfers property to the trust and instructs the trustee on how to manage the trust property. You don’t need to file this document with any governmental authority. You form an LLC by filing Articles of Organization with state government, usually the secretary of state’s office, and paying a filing fee.