Should Your Trust Own Your Business?
The question often arises as to whether your company, a corporation, LLC, or limited partnership, should be owned by your revocable trust. Ownership is probably not the best way to characterize it because a company is "owned" by whomever owns the stock. Rather, the stock or membership interests are an asset that require your signature to transfer it. Because probate is the formal process whereby title to assets are transferred at the owner's death, your company's interest will be subject to probate if it is held in your name at your death (subject to various factors, including value).
In order to avoid probate, ownership interests may be held in the name of a revocable trust so when the individual dies, the interest or stock is not held in his or her name, but the trust’s name. So at the business owner's death, the interest held by a revocable trust avoids probate because the owner as an individual is not the title holder. The named successor trustee has full power to sell the stock or do whatever is necessary in order for the company continue. Basically, the trustee does what is required per the instructions provided in the trust document and corporate by-laws.
By simply making sure your revocable trust “owns” the company, your loved ones can avoid the time, expense, and frustration of probate. You have effectively maneuvered around all the problems and headache associated with probate. Smooth Sailing!
Disclaimer: This article is intended for general informational purposes only and is not intended to provide estate planning advice. You must consult your estate planning attorney, accountant or other tax advisor for any specific income, business or tax guidance.