LLC Planning and Drafting to Accomplish Estate Planning Objectives

The use of LLCs in estate planning is shaped by a complex interplay of state law, federal tax statutes, and judicial decisions. This program will discuss advanced drafting techniques for LLC operating agreements, focusing on asset protection, tax compliance, and estate inclusion risks. For clients with numerous LLCs, a master operating agreement with exhibits listing each entity and authorized signatories can simplify administration. In Wandry v. Commissioner, T.C. Memo 2012-88 the Tax Court upheld a formula clause transferring a fixed dollar amount of LLC interests. But in Sorensen v. Commissioner, T.C. Memo 2018-34 the IRS challenged the taxpayer’s failure to respect valuation adjustment mechanisms. How can taxpayers adhere to formalities of these mechanisms so that they will be respected? In the Estate of Powell v. Commissioner, 148 T.C. No. 18 (2017) because the decedent had retained control over liquidation or distribution of an LLC it resulted in estate inclusion under IRC §2036(a). What steps can be taken to avoid this negative result? Strategies might include creating special voting membership interests for liquidation/distribution decisions, held by independent trustees. Another may be to use “authorized members” or trust protectors to approve key decisions, ensuring the transferor cannot exercise indirect control. These and other practical issues will be reviewed.

Speakers: Martin Shenkman, Esq., Alan S. Gassman, Esq. and Jonathan G. Blattmachr, Esq.