Do you want to protect your LLC, plan your estate, or avoid probate? One powerful way to do that is by transferring ownership of your Limited Liability Company (LLC) into a trust.
But how exactly do you put an LLC into a trust?
In this guide, we’ll walk you through the step-by-step process, explain why it matters, and help you avoid costly legal mistakes.
Why Put an LLC Into a Trust?
Transferring your LLC into a trust can offer major advantages:
1. Avoid Probate
By placing your LLC interest in a revocable living trust, your heirs can inherit the business without going through probate court.
2. Estate Planning
Trusts allow you to control how and when your LLC is distributed after your death.
3. Asset Protection
Certain types of trusts can protect LLC assets from creditors and lawsuits.
4. Continuity of Business
It ensures that your business continues to operate smoothly if something happens to you.
What Type of Trust Should You Use?
Most people use a revocable living trust to hold their LLC interests. Why?
- You retain control of the assets during your lifetime
- You can amend or revoke the trust at any time
- On death, the trust becomes irrevocable, avoiding probate
You can also use irrevocable trusts for stronger asset protection—but you’ll give up control.
Tip: Consult an estate planning attorney to choose the best trust type for your goals.
How to Put an LLC Into a Trust (Step-by-Step)
Step 1: Create a Trust
If you don’t already have one, work with an estate planning attorney to draft a trust agreement.
- Name yourself as the trustee (for revocable trusts)
- Name your successor trustee(s)
- Include language allowing the trust to own LLCs
- Get the trust notarized and executed properly
Step 2: Amend the LLC Operating Agreement
Update your LLC Operating Agreement to reflect the trust as a member or owner.
Include:
- The name of the trust (e.g., The John Smith Revocable Living Trust)
- The trustee’s name
- New member rights (if applicable)
If it’s a multi-member LLC, get approval from the other members as required.
Step 3: Assign Your Membership Interest to the Trust
You’ll need to draft a Membership Interest Assignment Agreement that:
- Transfers your ownership from your name to the trust
- Is signed and dated
- May need to be notarized, depending on your state
Example:
“I, John Smith, hereby assign 100% of my interest in ABC Logistics LLC to The John Smith Revocable Living Trust, dated January 1, 2024.”
Step 4: Update State LLC Records (If Required)
You may not need to re-file anything with the Secretary of State unless:
- Your state requires notification of new members
- You’re also changing the LLC’s registered agent or manager
Double-check your state’s LLC laws to confirm.
Step 5: Update Tax and Banking Records
After transferring the LLC to your trust:
- Update IRS records if the responsible party changes (Form 8822-B)
- Update bank accounts and financial institutions to reflect the trust as the LLC’s owner
- Notify your accountant for proper tax treatment
Common Mistakes to Avoid
- Failing to update the Operating Agreement
- Not properly executing the transfer document
- Forgetting to notify your CPA or bank
- Using the wrong type of trust for your goals
Always consult an estate planning attorney or business law expert before finalizing the transfer.
Can You Put an LLC Into a Trust If It Has Multiple Members?
Yes, but it’s more complex.
- Other members must approve the change (check your Operating Agreement)
- The trust can be a member, but may have limited rights
- You’ll still need to follow proper assignment and documentation
Final Thoughts
So, how do you put an LLC into a trust?
It involves creating a trust, assigning your LLC ownership interest to it, and updating your legal documents accordingly. Doing this right can help you protect your business, plan your estate, and ensure a smooth transition to your heirs.
