When setting up a trust, most people name individuals—like family members—as beneficiaries. But what if you want to direct your trust assets to a business?
Can an LLC be a beneficiary of a trust?
Yes, an LLC can be a beneficiary of a trust.
However, it comes with important legal, tax, and strategic considerations that must be addressed in your estate or business plan.
This guide breaks down how it works, when it makes sense, and how to do it properly.
Can a Trust Legally Name an LLC as a Beneficiary?
Yes. Legally, a trust can designate any legal entity as a beneficiary—including:
- Individuals
- Corporations
- Nonprofits
- LLCs (Limited Liability Companies)
As long as the LLC is properly formed and recognized as a legal entity, it can receive trust assets just like a person can.
This must be clearly stated in the trust document, including the LLC’s legal name and tax ID if possible.
Why Name an LLC as a Beneficiary?
There are several strategic reasons to name an LLC as a trust beneficiary:
1. Asset Protection
Assets passed to an LLC are generally shielded from personal creditors—especially in multi-member LLCs. This adds another layer of legal protection.
2. Business Succession
If the trust owns a business or revenue-generating property, naming an LLC as the beneficiary allows for business continuity without probate disruption.
3. Estate Planning Efficiency
Distributing trust assets to an LLC can:
- Avoid probate
- Consolidate management under one entity
- Streamline distributions to multiple family members (via LLC membership interests)
4. Tax Strategy
Trusts and LLCs have different tax treatments. With proper structuring, you may be able to optimize tax liability across entities (consult a CPA or estate attorney).
How to Structure a Trust with an LLC Beneficiary
To successfully name an LLC as a trust beneficiary, follow these steps:
1. Form the LLC
Ensure your LLC is legally formed, with a valid EIN, Operating Agreement, and registered with your state. 2. Draft or Amend the Trust
Work with an estate planning attorney to:
- Clearly name the LLC as a beneficiary
- Define what assets or income streams the LLC is entitled to
- Detail how and when the LLC receives distributions
Tip: If you’re using a revocable living trust, you can retain control over both the trust and the LLC during your lifetime.
Legal and Tax Considerations
Tax Reporting
When an LLC receives trust income or assets:
- The LLC may owe taxes based on its entity type (disregarded, partnership, or corporation)
- The trust may need to file IRS Form 1041, and the LLC may need to report income on its Form 1065 or Schedule C
No “Personal” Benefit to LLC Owners Unless Distributed
Just because the LLC is a beneficiary doesn’t mean individual members benefit directly. Assets must be distributed from the LLC according to its Operating Agreement.
Proper Documentation Is Key
- Update your trust document with legal counsel
- Include the LLC’s full name and EIN
- Ensure the trustee understands how to handle distributions to a legal entity
Real-Life Example
Sarah, a Florida entrepreneur, owns a real estate investment trust and multiple properties via an LLC. She creates a revocable trust and names her LLC as a beneficiary. Upon her passing, all rental property income and ownership rights transfer to the LLC—ensuring her children, who are members of the LLC, continue to receive rental profits without going through probate.
Can a Trust Own an LLC and Make It a Beneficiary?
Yes, but with caution. A trust can:
- Own an LLC (the trust is the member)
- Distribute assets to an LLC (the LLC is the beneficiary)
However, these are two different roles. In complex estate plans, the trust may distribute assets to one LLC and own another LLC simultaneously.
Always consult an estate attorney for layered structures like this.
Final Thoughts
Yes, an LLC can be a beneficiary of a trust.
It’s a powerful tool for estate planning, business succession, and asset protection—especially if you:
- Want to pass business income to your heirs
- Need to protect assets from personal liability
- Seek long-term tax efficiency
The key is to document it properly, understand the legal boundaries, and work with trusted advisors to keep everything compliant.
