The widow of car-dealership magnate Ray Brandt filed court papers to evict her family from their Old Metairie compound on Tuesday, the latest escalation of a bitter family battle over control of the massive estate that Brandt left behind when he died in late 2019.
While trusts and Limited Liability Companies (LLCs) are very different legal vehicles, they are both used by business owners to protect assets. Understanding their differences, strengths and weaknesses will help determine which is best for your situation, as explained by the article “Trust Vs. LLC 2023: What Is The Difference?” from Business Report.
A trust is a fiduciary agreement placing assets under the control of a third-party trustee to manage assets, so they may be managed and passed to beneficiaries. Trusts are commonly used when transferring family assets to avoid probate.
A family home could be placed in a trust to avoid estate taxes on the owner’s death, if the goal is to pass the home on to the children. The trustee manages the home as an asset until the transfer takes place.
What are the different types of trusts?
A revocable trust is controlled by the grantor, the person setting up the trust, as long as they are mentally competent. This flexibility allows the grantor to hold ownership interest, including real estate, in a separate vehicle without committing to the trust permanently.
The grantor cannot change an irrevocable trust, nor can the grantor be a trustee. Once the assets are placed in the irrevocable trust, the terms of the trust may not be changed, with extremely limited exceptions.
A testamentary trust is created after probate under the provisions of a last will and testament to protect business assets, rental property and other personal and business assets. Nevertheless, it only becomes active when the trust’s creator dies.
What assets should stay out of a trust?
Watch a brief video with Jacksonville Estate Planning Attorney Bill O’Leary, Esq. about:
- Why some assets should not be transferred into your trust
- How some assets are better protected outside of your trust
- What risks are incurred by having some kinds of assets in your trust
Who is involved in trusts and what are their roles?
The grantor or settlor is the person who creates the trust. The trustee is the person who manages the assets in the trust and is in charge of any distribution. A successor trustee is a backup to the original trustee who manages assets, if the original trustee dies or becomes incapacitated. Finally, the beneficiaries are the people who receive assets when the terms of the trust are satisfied.
What is an LLC and what are its benefits?
An LLC is a business entity commonly used for personal asset protection and business purposes. A multi-or single-member LLC could be created to own your home or business, to separate your personal property and business property, reduce potential legal liability and achieve a simplified management structure with liability protection. Our article, New Government Reporting Requirements for LLCs explains one of the federal requirements of having an LLC.
What are the advantages of a trust in Jacksonville?
The most significant advantage of a trust is avoiding the time-consuming process of probate, so beneficiaries may receive their inheritance faster. Assets in a trust may also prevent or reduce estate taxes. Trusts also keep your assets and filing documents private. Unlike a will, which becomes part of the public record and is available for anyone who asks, trust documents remain private. Read more in our article, Using Living Trusts to Protect Your Florida Business Assets
LLCs and trusts are created according to Florida state laws. While LLCs are business entities designed for actively run businesses, trusts are essentially pass-through entities for inheritances and to pass dividends directly to beneficiaries while retaining control.
Estate Planning Attorney Bill O’Leary will be able to judge whether you need a trust or an LLC. If you are a Jacksonville small business, it may already be an LLC. However, there are likely other asset protection vehicles our estate planning team can discuss with you. Schedule a discovery call with Team Legacy to discuss how we can help you protect your property using the best entity for your purposes and assets.
Reference: Business Report (April 14, 2023) “Trust Vs. LLC 2023: What Is The Difference?”
