24 Sep Can My Minor Child Inherit My Business?

If you’re a business owner and you’ve created something successful from the ground up, it’s a great point of pride. You want to make sure it’s well cared for and remains in the best hands if you’re unable to run it someday. 

Many people pass on their business to their adult children by writing it into their will. However, if your child isn’t 18 yet, you’re left wondering, “Can a minor child inherit a business? How do I pass on my business to my son or daughter?” 

While a minor child can’t directly inherit your business, there are ways to make it happen. To get a better understanding, we’ve provided an example scenario. Let’s take a look at Maggie’s situation. 

Passing on Your Business to Your Child

Maggie, an entrepreneur, built a thriving robotics company from the ground up. She saw fast growth and success. However, Maggie is in poor health. If she passes on, she wants to make sure her business will go to her 12-year-old daughter, Lily. Unsure of the steps to take, Maggie reached out to an attorney who knew how to handle the fine details of estate planning with LLCs. 

One thing Maggie learned is that a minor child can not directly inherit a business. However, there are ways to leave them with the rights to your company. Maggie and her attorney crafted a detailed plan to make sure her daughter would own the business when she turned 18. 

There are many ways to leave an inheritance for your children. In Maggie’s case, the first three steps were to: 

1. 1. 1. Set up a trust. 
      2. Choose a trustee. 
      3. Fund the trust. 

Funding a Trust with an LLC in Arizona

First, with the help of her estate planning lawyer, Maggie set up a trust specifically for Lily. Because of her situation, with assets that were growing quickly, Maggie chose an irrevocable trust so she could leave everything to her daughter without paying estate taxes.

Next, Maggie named her trusted business partner, Dave, as the trustee. If anything happens to Maggie, Dave will oversee operations until Lily turns 18. 

Then, to fund the trust, Maggie completed a transfer document that assigns the LLC’s membership interests to the trust. She updated the LLC’s records to reflect the trust as the new owner. (This way, even though her daughter isn’t directly inheriting the business, she will inherit all of the assets the trust owns. And the trust, now funded, is the legal owner of Maggie’s LLC.) 

Finally, Maggie informed the relevant parties—like her bank and her business partners—of the change in ownership. 

With the trust documents in place, Maggie can rest assured that her business will remain in good hands until ownership can pass to her daughter. Working with an experienced attorney helped to give Maggie peace of mind. She can relax, knowing that her legacy will be kept in the family and her wishes will be respected. 

Estate Planning Attorneys in Glendale, Arizona

Managing a financial asset like a business is a large responsibility. You can understand why it’s wise to involve an estate planning professional in the process of passing down your business to your son or daughter. At Phelps LaCLair, we’ll be with you every step of the way. 

We want to make estate planning easy for you, while helping you meet your goals and making sure you have all your bases covered. Everyone’s situation is different, and we can help you select the specific tools needed to fulfill your wishes. If you’d like to discuss your estate planning options, set up a free consultation today.

Image by StartupStockPhotos from Pixabay on 9.12.2024 used under the creative commons license