Editor’s note: This is part 13 of an ongoing series about using trusts and LLCs in estate planning, asset protection and tax planning. The effectiveness of these powerful tools — especially for asset protection and tax planning — depends very much on how they are configured to work together and whether certain types of control over assets and property are surrendered by the property owner. See below for links to the other articles in the series.
Limited liability companies (LLCs) are business entities that can be used as powerful asset protection tools and as “disaster containment units.” LLCs avoid cross-liability where a lawsuit against one asset causes problems with a different asset. LLCs that hold assets function in a similar manner to an egg carton — egg cartons and LLCs both keep a problem (a broken egg or perhaps a rental property subject to a lawsuit) from spilling onto the other assets of the LLC owner.
