Can a Living Trust Be a Member of an LLC?

By Stephanie Kurose, J.D.

Can a Living Trust Be a Member of an LLC?

By Stephanie Kurose, J.D.

An LLC, or limited liability company, is a common type of business structure that provides its owners, also called members, with personal liability protection and flexibility in management and taxation. As a part of that flexibility, states generally do not restrict the type or number of members in an LLC. Thus, a living trust can be a member of an LLC and can even be the sole LLC member.

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What Is a Living Trust?

A living trust is established by a grantor, who names a trustee to manage the trust on behalf of a named beneficiary. It is a legal document that can possess ownership rights over any of the grantor's assets, including ownership of an LLC. A living trust can either be revocable or irrevocable, which is typically established at the time of creation.

A revocable trust can be terminated at any time by the grantor and can also be reached by creditors. An irrevocable trust is harder to terminate and is typically protected from any of the grantor's creditors. Both types of trusts can be members of an LLC.

Membership of a Trust in an LLC

If the grantor is an owner of an LLC, that ownership is considered an asset. State laws governing living trusts allow trustees to manage nearly any asset of the grantor. Thus, since LLC ownership is considered an asset, a living trust can be a member of the LLC. In addition, because state laws recognize single-owner LLCs, a living trust can also be the sole owner of an LLC.

Advantages of a Having a Living Trust as an LLC Member

One of the advantages of having a living trust as a sole owner or co-owner of an LLC is that it allows the grantor to simultaneously manage a business while taking advantage of a trust's flexibility. When the LLC ownership of a grantor is held in the living trust, the trustee can provide for the trust's beneficiaries even after the grantor dies. At that time, the trust's beneficiaries inherit a de facto share of the LLC. If the trust is irrevocable, the grantor's creditors, as well as the beneficiary's creditors, cannot reach either the LLC's assets or the trust assets.

In addition, if the trust holds all of the grantor's ownership in an LLC, those assets can avoid probate when the grantor dies. Probate involves a judge distributing the deceased grantor's assets to the named beneficiaries or heirs, a process that can be lengthy and costly. By contrast, distribution of a living trust can typically be done within a few weeks.

There are also real estate advantages of having an LLC owned by a living trust. The grantor can dictate the terms of the trust, allowing any beneficiary to live on the grantor's property indefinitely, even if it is owned by the trust.

Consult an Attorney

If you are interested in establishing a living trust for the purpose of owning an LLC, you should consult an attorney who can help go over the different options available.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.