When it comes to asset protection, you can create an LLC or a trust to hold your real estate investments. Both options have benefits and drawbacks. However, another possibility is to create an LLC that’s owned by a revocable trust.
Can a Trust Own an LLC?
Yes. You may form an LLC with a revocable trust as its sole member. Unlike an irrevocable trust—which cannot be modified by its creator after it’s been formed—a revocable trust allows the grantor more control over assets.
What’s the difference between a trust and an LLC?
Trusts and LLCs are both legal entities than can hold assets, but there are several key differences when it comes to privacy, asset protection, cost, and probate (the legal process for distributing assets). You can read more about the differences on our Trust vs. LLC page. But the basic differences are:
- A Trust is like a lock-box that holds assets for the benefit of another and can’t easily be tampered with once it’s been created.
- An LLC is a business structure that operates like a partnership (with minimal oversight) but benefits from liability protection, like corporation—LLCs can hold assets, like a trust, but they allow owners more oversight and flexibility.
Why create an LLC in addition to a revocable trust?
Combining the LLC model with a revocable trust can give your assets an extra layer of protection, and can also help you avoid probate (the legal process of distributing assets). The idea is that you’ll get limited liability protection for your assets and help your beneficiaries more easily navigate the probate process, which can be lengthy and costly.
That said, forming an LLC comes with its own costs and might infringe on your privacy. Whether you choose to hold your real estate investments in an LLC, a trust, or a combination of the two depends on your unique circumstances.