Estate Planning With LLCs: Navigating Tax Challenges, Reporting Requirements, and Planning Strategies for Counsel

The use of an LLC in estate planning can shelter assets, reduce overall gift and estate taxes, and avoid probate. Although the increased estate exemption amount lessens the need to take aggressive valuation discounts on assets transferred into an LLC, the structures retain significant asset protection and income tax savings features.

LLCs provide flexibility in allocating rights to profits and capital and can be used to shift income and property appreciation. The general structure of an LLC involves transferring assets to the company while also retaining ownership and control over the transferred assets. Shares in the LLC are then granted to family members or other potential heirs/beneficiaries. By granting income shares to family members who may be in a lower income tax bracket, the managing member can reduce overall income taxes.

However, under current tax law, there are some complex tax implications, particularly under the capital ownership rules of IRC 704(e). Estate planners must grasp a complete understanding of applicable tax rules and regulations when funding LLCs through nontaxable transfers and sales, using distributions to shift income tax burdens and their interplay with other planning tools.

Finally, the application of the pass-through entity election for LLCs must be considered, and compliance with the Corporate Transparency Act will be required.

Listen as our experienced panel discusses structuring and operating LLCs for estate planning purposes, details how to withstand IRS scrutiny of transfers and operations, explores gifting through LLC distributions, and reviews other effective tactics for utilizing LLCs in estate planning.

1. Using LLCs for asset protection and business continuation/succession planning
2. Income tax planning opportunities with LLCs
3. Key provisions for operating agreements
4. Using LLCs with trusts and other wealth transfer vehicles
5. Pass-through entity election
6. Corporate Transparency Act

The panel will review these and other relevant topics:

• What are the income tax and asset protection benefits of LLCs?
• Tax planning through lifetime gift of LLC interests
• Key considerations when drafting the operating agreement
• Utilizing trusts and key trust agreement provisions
• Using partnership allocation rules and profits interests to shift the income tax burden to LLC members with lower marginal income tax rates

Learning Objectives

After completing this course, you will be able to:

• Ascertain methods for using LLCs for asset protection and tax planning
• Recognize income tax minimization opportunities utilizing LLCs in estate planning
• Understand how LLCs with trusts can be used for income tax and estate planning

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.