Attorney Thomas B. Burton answers a reader question about how to gift the owner's interest in an LLC into a Trust in order to gift these properties to the reader's son upon their death.
Transcript of Video: How Do I Gift an LLC That Holds Rental Property to a Trust for My Son?
Today's question comes from Milwaukee
Wisconsin and the reader writes how do I
gift an LLC that holds rental property to a
trust for my son he explains I wish to
gift several rental properties that are
titled to an LLC to an irrevocable trust
for my son if it were titled in my name
it would be easy to make the transfer
but in this case we would not be
changing title but rather ownership of
the LLC so great question and you're on
the right track here and this is a good
method for a couple reasons which I want
to discuss first putting your rental
properties in an LLC is smart for
liability protection and for leaving
them to the next generation or to your
heirs for estate planning
second it's smart you're planning to
leave them at death because real estate
often appreciates and by leaving them to
your son at death he would get a step-up
in basis meaning whatever they're worth
at your death he would that would
become his value if he were to sell them
so for capital gains taxes let's say you
bought the properties for two hundred
thousand twenty years ago and when you
die they're worth five hundred thousand if
you leave them to him at death your son
will take them at five hundred thousand
and if he sold them for five hundred he
would potentially owe no capital gains
whereas if you gifted them to him today
he would take them at your basis of two
hundred thousand and owe capital gains
tax of 15% on the $300,000 that he made
for selling them for five hundred
thousand when his basis is at two
hundred thousand so it's a great method
to leave highly appreciate assets like
real estate to someone upon death like
you're doing now as for how to do this
you can simply execute an assignment if
you're the sole member of your LLC you
can assign your membership interest
that's what we call your ownership
interest in the LLC in
Wisconsin you can assign it to your
trust so that it's governed by the terms
of your trust because an LLC membership
interest is considered personal property
you can do this through an assignment
that you can execute in front of a
Notary a simple contract I do this all
the time for my clients any good estate
planning attorney could help you execute
this assignment of your 100% of your LLC
interest into your irrevocable trust
then your LLC and what that owns the
properties would be governed by the
terms of your trust upon your death so
you don't need to change the deed this
way because the LLC already owns the
rental properties so I would say this is
a great plan for the multiple reasons I
outlined above and again you should be
able to do this very simply by
contacting any good estate planning
attorney can help you execute that
assignment and get that LLC interest
right into your trust great question and
thank you for asking!
© 2019 Law Office of Thomas B. Burton. All Rights Reserved.
Transcript and captions provided for ease of access for the hearing impaired.
For questions about this topic, or to suggest a topic for a future blog post, please contact my office.
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