As estate planning lawyers, we frequently receive inquiries from clients who wish to transfer their assets into a limited liability company and allocate shares to their beneficiaries while they are still alive.

So, are private family companies an effective tool for estate planning? The answer is both yes and no. Here are some key considerations:

1. Exclusion of Certain Assets: Some assets may be left out of the company structure, such as personal effects, personal bank accounts, life insurance, and annuities. Any property not transferred into the company may be subject to intestacy laws, requiring the court to determine how those assets will be distributed.

2. Need for Shareholder Consensus: Since the assets are held in the name of the company, decisions about the company’s properties will require agreement among the shareholders at all times.

3. Share Structure Requirements: For this arrangement to function effectively, all shares should ideally be held by the beneficiaries, with the principal serving as a director. This means the principal acts as an employee of the company, who can be replaced and will serve at the discretion of the shareholders. Alternatively, both the principal and beneficiaries can hold shares in the company, with the beneficiaries having no voting rights.

Given these complexities, it’s important to complement this method with additional estate planning tools, such as a will or trust, to ensure a comprehensive strategy. Consulting with an estate planning lawyer can help you structure your wealth with succession planning in mind.

Should you require any further information, do contact us at info@cfllegal.com.