I recommend a revocable living trust to most business owners I work with. Not because it is trendy, but because it solves problems a will cannot solve on its own.
A revocable trust lets you keep control of your assets while you are alive, name someone to step in if you become incapacitated, and avoid probate on the assets it holds when you die. For a business owner, the question is not whether to have one. It is what actually goes into it.
1. Your business ownership interest
If you own an LLC, corporation, or partnership interest, that interest can often be assigned into your trust. This keeps the business out of probate and allows your successor trustee to step in and manage or vote that interest without court involvement.
I say "can often" because your operating agreement or bylaws may have restrictions on transfers, including transfers into a trust. Before we fund the trust with a business interest, we need to check those governing documents and, if needed, get consent from other owners.
2. Real estate used by or owned by the business
Many business owners hold their commercial building, warehouse, or office in a separate LLC that leases space to the operating company. That real estate LLC interest, or the real estate itself if you own it directly, generally belongs in the trust too.
This keeps the property out of probate and keeps rental income flowing to your successor trustee without interruption.
3. Bank and brokerage accounts tied to the business
Personal accounts you use to fund the business, capital reserves, or investment accounts earmarked for company use should be titled in the name of the trust where appropriate. This avoids a gap in access if something happens to you suddenly.
A frozen bank account during probate can be just as damaging to a business as a frozen ownership interest.
4. Life insurance and buy-sell funding
If life insurance is meant to fund a buy-sell agreement between you and business partners, we need to look carefully at how that policy is owned and who the beneficiary is. Sometimes the trust is the right owner or beneficiary. Sometimes it is not, especially if the buy-sell agreement already dictates a specific structure.
Getting this wrong can create a mismatch between what your buy-sell agreement promises and what actually happens when a policy pays out.
5. What generally should not go into the trust
Not everything belongs in a revocable trust. Retirement accounts like 401(k)s and IRAs usually should not be retitled into a trust, because doing so can trigger unwanted tax consequences. Instead, we handle those through beneficiary designations.
Vehicles used personally, and some smaller personal accounts, may not be worth the paperwork either. Part of my job is helping you draw that line so we fund the trust with what matters and skip what does not.
- Business ownership interests, after checking governing documents
- Real estate connected to the business
- Operating and reserve accounts tied to the company
- Life insurance, coordinated with any buy-sell agreement
- Typically not retirement accounts, which pass by beneficiary designation instead
Funding a trust correctly is just as important as signing it. If you have a trust that has never been properly funded with your business interests, or you do not have one yet, reach out through blgattorney.com or call my Oklahoma City office and let's get it right.