Estate and trust example
Estate and trust example with 20 LLCs, holding companies, and a trust.
Vikram Angurala JD LLM
11/10/20241 min read
Okay, let's break down this estate and trust example with 20 LLCs, holding companies, and a trust.
Structure:
20 LLCs: Each LLC owns and operates a property, either as a long-term rental or a short-term rental (like Airbnb).
WY Holding C-Corp: This corporation owns all 20 LLCs. This consolidates ownership under one entity.
WY Management C-Corp: This corporation is responsible for managing the 20 properties, collecting rent, handling maintenance, etc.
Trust: The WY Holding C-Corp is owned by a trust. This trust has its own EIN.
Income/Loss Distribution: The trust can choose to distribute income or losses generated by the LLCs to its beneficiaries or retain them within the trust.
Why this structure?
Liability Protection: LLCs offer liability protection, separating personal assets from business liabilities. The C-Corp adds another layer of protection.
Tax Efficiency: C-Corps can offer tax benefits depending on the situation. Trusts can also be tax-efficient, depending on how they are structured and managed.
Estate Planning: Holding the C-Corp in a trust can facilitate smooth transfer of ownership upon the grantor's death and avoid probate.
Centralized Management: The WY Management C-Corp provides centralized management for all the properties.
Income/Loss Distribution:
Can be distributed: The trust can distribute income generated by the LLCs to beneficiaries, providing them with a stream of income.
Cannot be distributed: The trust may choose to retain income for future needs, reinvestment, or to preserve the assets for future generations.
Key takeaway:
This is a complex structure with multiple layers. It's designed to provide liability protection, tax efficiency, and estate planning benefits. The trust plays a crucial role in holding the assets and managing the distribution of income or losses.
Quiz question:
What is one of the main reasons for holding the WY Holding C-Corp in a trust?
A) To increase complexity
B) To avoid probate
C) To make taxes more complicated
D) To confuse beneficiaries