Summary

This article discusses the benefits of having a trust, whether revocable or irrevocable, own a Limited Liability Company. It highlights advantages such as probate avoidance, privacy, incapacity planning, and asset protection. The article also mentions the potential benefits of using an asset protection trust to safeguard business interests and assets. It emphasizes the importance of consulting with an experienced attorney for proper estate planning and asset protection.

The answer to this question is yes. Many business owners under-appreciate the importance of estate planning to protect their business. Nevertheless, after years spent building your business, protecting what you have created should go without saying, but it is often overlooked.

One of the most effective ways to protect your business is with a living trust or asset protection trust that will, among other things, provide the ability to legally transfer your membership interest when it is time to turn the reins over to someone else. A trust is also useful to own a holding company for streamlined estate planning.

The Benefits of a Trust Owning Your LLC

Probate Avoidance: When your membership interest in a limited liability company (LLC) is transferred to a trust that you have created, it will not be subject to probate and this will allow for a much smoother transition after you pass away. The time and money your loved ones will save avoiding probate is an additional benefit of your LLC being owned by a trust.

Privacy: The probate process is entirely public. During these proceedings, confidential business information can be made public, as well as, information that can damage your business's reputation.

Incapacity Planning: Equally important to note is that holding your LLC in trust can not only be a benefit when you pass away but also when you become incapacitated due to injury or illness.

With your wishes for the management of your LLC spelled out in the trust, you can be confident that operations will continue if you become temporarily unable to run the company for any reason.

Should Your LLC Be Owned by Revocable or Irrevocable Trust?

A revocable living trust is one that can be changed or modified after it has been established and while you (the grantor, settlor, or trustor) are alive. Consequently, an irrevocable trust is one that cannot be changed or modified after it has been established.

With your LLC owned by a revocable living trust, you will enjoy probate avoidance, retain access and control over the LLC, and can receive income from it during your lifetime. However, because you still have access to the LLC, so will your creditors.

This means a successful judgment or lawsuit can allow your creditors to reach into the revocable living trust and seize your membership in the LLC to satisfy a debt. For this reason, an LLC or any other asset that you wish to protect from lawsuits and creditor’s claims is better served by being transferred to an irrevocable trust that cannot be accessed to satisfy a lawsuit or judgment.

What Is an Irrevocable Asset Protection Trust?

Placing assets such as membership interests in an LLC into an irrevocable trust can provide strong asset protection. Because an irrevocable trust is treated as a separate legal entity, the assets it holds are legally distinct from the grantor.

However, traditional irrevocable trusts come with a significant trade‑off: once assets are transferred, the grantor loses direct control and may no longer enjoy discretionary benefits such as income distributions.

To address this limitation, estate planners developed the asset protection trust, also known as a self‑settled trust. An asset protection trustis a form of irrevocable trust that allows the settlor (the person creating the trust) to retain beneficial interest while still shielding assets from future creditors. In other words, the settlor can remain a beneficiary without sacrificing protection.

Historically, self‑settled trusts were prohibited, but today 17 states including South Dakota, Nevada, Delaware, and Rhode Island have enacted statutes authorizing asset protection trusts. This development has made asset protection trusts a powerful tool for business owners, professionals, and families seeking liability protection and estate planning flexibility

Modern Tools for Flexibility in Irrevocable Trusts

Even though irrevocable trusts are designed to be permanent, modern estate planning offers tools to provide flexibility. Two of the most effective are the use of a trust protector and the process of trust decanting.

Trust Protector: A trust protector is an independent party appointed to oversee the trust and make certain adjustments if circumstances change. Depending on the trust language, a protector may have authority to modify administrative provisions, replace trustees, or adapt the trust to new tax laws. This role adds a safeguard that helps ensure the trust continues to serve its intended purpose over time.

Trust Decanting: Decanting allows trustees to “pour” assets from an existing irrevocable trust into a new trust with updated terms. This process can be used to correct drafting issues, modernize provisions, or add flexibility for beneficiaries. While the original trust remains irrevocable, decanting provides a lawful way to restructure without court intervention in many states.

Together, these tools give families and business owners greater control over irrevocable trusts, helping them adapt to changing laws, tax environments, and personal circumstances while still preserving asset protection.

The Benefits of an Irrevocable Asset Protection Trust Owning Your LLC

An asset protection trust essentially combines the flexibility and the benefits of a revocable trust with the asset protection of an irrevocable trust, specifically

Probate Avoidance: By placing your LLC membership interests into an asset protection trust, you ensure that ownership transfers outside of probate, saving time, expense, and public disclosure.

Privacy: An asset protection trust enhances anonymity by making it more difficult for creditors or litigants to identify your LLC or personal holdings. This privacy feature alone can serve as a powerful deterrent against lawsuits.

Access and Control: The trust document allows you to stay in control of your LLC, receive distributions from it, and specify to whom your membership interest in the LLC should be transferred when you die.

Tax and Succession Planning: Depending on the jurisdiction, asset protection trusts may offer estate tax advantages and provide a clear succession plan for family businesses, real estate portfolios, or investment holdings.

Deterrence Against Litigation: One of the first things our Florida personal injury attorney team does when suing is search for assets of a potential defendant. The combination of privacy, control, and protection often discourages frivolous lawsuits, as creditors recognize the difficulty of reaching assets held in a properly structured asset protection trust.

Asset Protection: An asset protection trust severely limits a creditor's ability to bring a claim to access the assets in the trust. For example, if you establish an asset protection trust and fund it with your membership interests in an LLC, and are later sued by a third party, that third party’s access to your membership interest in the LLC that is held by the trust will be barred.

The only exception to this rule is if the third party can prove that 1) the original transfer of your membership interest to the trust was fraudulent as to the specific claim at the time of the transfer, or 2) that the transfer violated a contractual obligation you owed to the claimant or a valid court order.

An asset protection trust is a great tool for business owners and real estate investors, but can also be extremely beneficial for those engaged in professional practices such as doctors, dentists, lawyers, accountants, chiropractors, engineers, etc. that have a risk of personal malpractice liability.

Consult With an Experienced Florida Business Law Attorney

The bottom line is that you have worked really hard to create a successful business and it makes sense to protect your LLC. Addressing this concern, a more resilient solution emerged: the asset protection trust. An asset protection trust, also referred to as a self-settled trust, is an irrevocable trust designed to provide the settlor (the person creating the trust) with asset protection, even though he or she remains a beneficiary of the trust. Working with an experienced estate planning attorney to set up a trust that will own your LLC is an excellent way to begin safeguarding your livelihood and most important assets.

At Tarro Law, our team of experienced Florida business law attorneys and Rhode Island estate planning attorneys helps entrepreneurs, professionals, and families protect their companies and assets. Whether you’re forming a holding company, drafting operating agreements, or planning for succession, we provide clear, practical guidance tailored to your goals.

Schedule a consultation today to learn how Tarro Law can safeguard your business and estate. Call 401‑272‑8300 or connect with us through our online contact form to get started.

FAQs: Can a Trust Own an LLC?

1. Can an LLC be owned by an irrevocable trust?

Yes, an irrevocable trust can own an LLC. We may advise this for clients as part of their estate planning process when they have active business interests to protect or want to pass on to their heirs.

2. Can an irrevocable trust own a company?

An irrevocable trust can own a company and often will as part of a comprehensive estate plan. Many clients have active business interests which they desire to protect and do so via an irrevocable trust.

3. Can trusts own LLCs?

Unless the trust agreement explicitly prevents LLC ownership, then there is no law preventing an LLC from being owned by a trust. In fact, it is the opinion of the author everyone with assets should have a trust. Most clients prefer their trust to own the LLC for privacy, asset protection, avoiding probate, and other reasons.

4. Can a revocable trust be a sole member of an LLC?

If you have a revocable trust, then in almost all circumstances we recommend you make it a member of your LLC. This applies whether you have partners or if it's just you. The trust helps avoid probate and provides privacy. Many of these benefits apply to irrevocable trusts owning limited liability companies as well. Any transfers to a trust should comply with the formation documents, which is why you should consult an attorney for assistance.

5. Should an LLC be owned by a trust?

There are many advantages to having an LLC be owned by a trust, including increased asset protection, privacy, potential tax benefits, and the avoidance of probate - a good trust attorney can provide additional details.

6. How is an LLC owned by a trust taxed?

An LLC owned by a trust can be taxed as a sole-proprietorship, partnership, S-Corp, or Corporation or have the earnings paid by the Grantor or Beneficiaries. In short, you may determine what is best with a CPA and act accordingly. Our firm includes a CPA who can assist your attorney in making the best determinations.

7. How does a trust benefit business owners?

A trust benefits business owners via additional privacy, asset protection, and the avoidance of probate if drafted correctly. A trust can own an active business as part of your estate plan.

8. Which is better a trust or LLC?

Rather than choosing between a trust or an LLC, most business owners and families benefit from using both structures strategically. An LLC protects against business liability, while a trust ensures privacy, probate avoidance, and long‑term estate planning. Together, they form the foundation of a strong asset protection plan.