Absolutely! Your business may be your most valuable asset. Many advisors kind of forget about the business when they are putting a living trust in place for a client. If the business isn’t “owned” by the living trust it will be in the probate estate after you die.
Probating a business is really bad. The probate court gets involved in the business decisions of the company. The business interest can add substantial time to the probate process.
I very seldom see a business and living trust linked together. In order to make the living trust own the business, you have to turn in your stock certificate, cancel it on the corporate stock ledger, and have a new certificate reissued in the name of the trustee who holds the stock in the name of the trust for the benefit of the beneficiaries.
Oh, you didn’t ever issue stock. Your company is a sham any way, because you probably aren’t doing any thing else you are supposed to be doing to “maintain” your company.
Of course, the same process will be followed for ownership of an LLC. In an LLC, you don’t have stock; you have memberships represented by membership certificates and a membership certificate log. Read the other blogs on this site to learn more about LLCs. Don’t forget to take the free LLC Mini-Course. It’s great.
Companies (either corporations or LLCs) taxed under Subchapter S of the IRS Code need to be handled with extra care. The living revocable trust has to be specifically written to own an interest in a Subchapter S entity. The living trust has to be written as a Subchapter S qualified trust. That means special provisions have to be put into the trust to have it qualified with the IRS. My trusts are qualified Subchapter S trusts.
If the trust is not qualified, the subchapter S status of the entity will be lost, and the IRS will treat it as a C corporation. Be sure and signup for the free LLC Mini-Course.
