What You Need to Know About FLLCs for Estate Planning and Asset Protection

In the area of estate planning and asset protection, a Family Limited Liability Company (FLLC) is a standout as a flexible and strategic tool. The FLLC combines limited liability companies with the unique needs of family-owned businesses. Thus, it has numerous benefits such as protecting family assets and improving estate planning. In this blog, we break down exactly what an FLLC is, its benefits, how an FLLC works, and why your family can benefit from having one.

What is an FLLC?

A Family Limited Liability Company (FLLC) is an LLC set up by family members. Members of the FLLC must be related by blood, adoption or marriage. This structure includes virtues from corporations, partnerships, and sole proprietorships, enabling efficient family operation.

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Benefits of an FLLC:

Safeguarding your Assets:

A family's assets are protected from creditors' claims by creating an FLLC, providing ring-fencing for your assets, thus shielding family members from personal liability claims.

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Estate Planning and Tax Benefits:

An FLLC ensures that your estate remains in the family, reduces taxes, and makes succession easier. The operating document can outline how ownership interest may be transferred upon death or incapacity of family members, which reduces the likelihood of disputes between family members. By transferring ownership interests to heirs during the lifetime of the parents, the FLLC can also help reduce the taxable value of an estate.

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Operational Efficiency and Management:

An FLLC's operating document defines a clear framework for decision-making and asset transfer while preserving family members' control over assets.

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How Does an FLLC Work?

In an FLLC, a family member acts as the managing authority, known as the ‘Managing Member’. Roles, responsibilities, and structure are clearly defined in the FLLC's important documents. Essentially, the operating agreement defines most of the FLLC's operations and provides rights related to ownership, operational decision making, and transfer of assets.

The operating agreement must:

·???????? Specify and restrict ownership rights.

·???????? Designate decision-making responsibilities.

·???????? Detail how assets will be transferred.

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By separating the company's assets from the owners' personal holdings, this arrangement offers legal protection from business obligations and liabilities.

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Key Takeaways:

The operating agreement lays out the rules and conditions of the FLLC and explains how assets are managed and transferred. It also protects your assets from creditors' claims. An FLLC streamlines management and control by combining family assets into a single entity. With extra tax benefits, an FLLC can help you leave more of your estate to your heirs.

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For families considering the formation of an FLLC, it is crucial to consult with legal and financial advisors to tailor the FLLC to their specific needs and objectives. At Water and Shark Legal, our attorneys specialize in helping families deal with the complexities of FLLCs and other estate planning tools and ensure your family's assets are effectively managed and safeguarded by establishing an FLLC.

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Contact us at [email protected] to learn how setting up an FLLC can benefit your family and to receive tailored legal advice that addresses your unique circumstances. Let us help you safeguard your legacy and secure your family's financial future.