Business Entities and Estate Planning


One way to avoid probate is to change the ownership of an asset to a person’s revocable trust. For bank and brokerage accounts, the custodian of the asset needs to be asked to assist in retitling the account. For real property, the attorney will typically prepare, notarize and record a quitclaim deed. But what if a person owns stock in a privately held corporation, a membership interest in a privately held LLC, or a partnership interest in a privately held general or limited partnership?

For all these business entities, ownership needs to be assigned to the person’s trust. If there is a stock certificate, it needs to be re-issued to the trust. If there are other owners of the business, particularly managing co-owners, they need to consent to the transfer and to agree that the transfer will not be considered as a violation of any business agreement that the person has previously entered into which places restrictions on the person’s right to transfer his interest in the entity.

The person at the business entity who writes checks to the owners for their shares of the income needs to title the checks in the name of the person’s trust. The accountant for the business needs to make out the K-1s to the name of the trust rather than to the person individually.

The above actions may not occur if the person setting up the revocable trust fails to contact the managers of the business to arrange for their written consent to the transfer, for the checks to be issued to the trust and for the K-1s to be issued to the trust.


About randyspiro

I am a super lawyer in California with dual specialization in Estate Planning and Taxation.
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