Frequently Asked Questions Regarding the Family LLC
Q: Why do I need a Family LLC in conjunction with a Living Trust and Will?
A: A Living Trust and Will alone does not protect your assets from Taxes, Probate and Medicaid Spend down.
Q: What assets can I put in my Family LLC?
A: *Non-Qualified assets (*not subject to income tax), Liens on property, etc.
Q: Can I put my IRA in the Family LLC?
A: No because the IRAs are *Qualified (*subject to income tax) With Tax planning and the IRA Rescue system, we can assist you in moving your IRA to the Family LLC after 59 ½.
Q: How do I protect my retirement accounts from Medicaid Spend down?
A: Once you are 59 ½, we begin the IRA Rescue process to covert tax qualified money to cash.
Q: Should I have a checking and savings account outside of the Family LLC?
A: Yes, you should always keep their personal or joint checking & savings accounts. Although, you should move your personal accounts into the Living Trust to help avoid probate. The Certification of Trust is included in the estate planning book that should be taken to the bank to change their existing personal checking and saving accounts into the name of their trust. You will also have a checking account for the Family LLC. The majority of your savings should be kept in the Family LLC for asset protection and funds can be transferred to the trust checking at any time money is needed.
Q: Should I have Credit Cards inside the Family LLC?
A: Credit cards inside the LLC should only be used for a business purpose. Day to day credit cards should be in your personal name.
Q: Should my homeowners or other insurance policies list the Family LLC?
A: Homeowners policies should be in the name in which the home is deeded, this is usually your personal name. Life insurance policies if they are term can be changed to the Family LLC. The owner and beneficiary should be the Family LLC. Once ownership is transferred all premium payments can come from the Family LLC.
If the life insurance policy is a whole life or universal life the cost basis should be reviewed before the policy is transferred into the Family LLC. This will be a taxable event. If premiums paid into policy are higher than the cash value, there should not be a taxable transfer. If the cash value is higher than premium payments made, then there could be a taxable event and you will owe taxes. If the tax liability is acceptable, then you can move the policy into the Family LLC. The owner and beneficiary should be the Family LLC. Once ownership is transferred all premium payments can come from the Family LLC. Auto Insurance is paid from the Living Trust Checking.
Q: What should they do with the guns, jewelry, or other personal items, should they be listed somehow in the Family LLC?
A: If these personal items are not listed on any insurance policies then they should not be listed in the Family LLC. Only items that hold significant value (Antiques for example) should be put in the Family LLC. Most personal items are worth pennies on the dollar and therefore do not need to be protected. Also, unless the gun is antique, it could create a liability for the Family LLC, and this is not good. Since most of the items above are undocumented it would be difficult to know whether the item still exists or not. If these types of items are to be passed to a beneficiary at the time of death then there is a document in the estate planning book called “Instructions for the Distribution of My Personal Property” to list assets that need to be given to a beneficiary. All non-listed assets are moved the trust with the Pour-over Will.
Q: Can I put my primary residence in the Family LLC?
A: We do not suggest you deed your primary residence in the Family LLC because you would give up your Capital Gains Exclusion and Stepped up Basis.