Trust Ownership of an LLC in Florida

A trust can own an LLC in Florida. Florida Statute § 605.0102(48) includes a trust in the definition of “person,” so a trust can hold a Florida LLC membership interest. Whether it can hold a particular one depends on the operating agreement, which also controls whether the trustee becomes a member or only a holder of the right to distributions.

A revocable living trust holds the LLC interest for probate avoidance and incapacity planning. An irrevocable trust holds it for asset protection, though a trust the owner funds for the owner’s own benefit does not keep the interest from the owner’s creditors. The other use is adding a second member to a single-member LLC, whose charging order protection Florida law makes conditional rather than absolute.

How the Transfer Works

Moving an LLC interest into a trust takes two legal steps, and one document can accomplish both. First, the member signs a written assignment of the membership interest. The assignment identifies the LLC, the transferring member, the trust, the trustee, and the percentage being transferred. Both the assignor and the trustee sign the document.

Second, the trustee has to be admitted as a member. Under Florida Statute § 605.0401(3), admission happens the way the operating agreement provides or with the consent of all the members. The same instrument can carry the assignment, the admission, and that consent. Where the assignor is the only member, the consent needed is the assignor’s own.

An assignment that stops short of admission makes the trustee a transferee: § 605.0502(1)(c) gives a transferee no vote and no access to company records, and § 605.0502(7) leaves the transferor holding every member right except the distributions. An LLC whose trust holds only a transferable interest still has one member.

After the assignment, the LLC’s internal records and operating agreement must be updated to reflect the trust as a member. The operating agreement should authorize trust ownership, specify how the trustee exercises voting and management rights, and address what happens when the trustee changes. Many standard operating agreements do not contemplate trust ownership at all and need to be amended before the transfer.

If the LLC has other members, the operating agreement may require their consent before an interest can be assigned to a trust. A transfer that violates an operating-agreement restriction is ineffective against anyone who knew about it. In most cases, the other members will agree because the transfer does not change the economic arrangement or management structure. The same person still controls the interest, just through the trust.

Revocable Trust Ownership

A revocable living trust lets the grantor keep full control of the LLC interest for life. At death the interest passes to the beneficiaries without probate. The transfer does not change the member count: an LLC whose only member is the grantor’s revocable trust still has one member, so the creditor remedies that turn on that number are unchanged.

The primary benefit is probate avoidance. Unless the operating agreement directs the interest elsewhere or a surviving spouse takes it by entireties, an LLC membership interest passes through the owner’s probate estate, which in Florida means court supervision, public filings, and delays that can disrupt business operations. In Blechman v. Estate of Blechman, 160 So. 3d 152 (Fla. 4th DCA 2015), a 50 percent membership interest passed outside probate because the operating agreement sent it to the deceased member’s children.

When the trust owns the interest, the successor trustee steps in immediately upon the grantor’s death or incapacity and manages the interest according to the trust’s terms. No court involvement is required.

A revocable trust also answers the incapacity problem. If the grantor becomes unable to manage their affairs, the successor trustee exercises the membership rights without a court-appointed guardian. Florida’s guardianship statute defers to that arrangement: under § 744.331(6), a court may not appoint a guardian if an alternative sufficiently addresses the problem, and the statute names a trust and a durable power of attorney as the alternatives. A durable power of attorney covers assets held outside the trust. The trust covers the membership interest itself.

The limitation is that a revocable trust provides no asset protection during the grantor’s lifetime. Because the grantor retains the power to revoke or amend the trust, Florida courts treat the trust’s assets as the grantor’s own property for creditor purposes. A creditor with a judgment against the grantor can reach the LLC interest held in a revocable trust just as easily as if the grantor held the interest directly.

Irrevocable Trust Ownership

An irrevocable trust can do asset protection work a revocable trust cannot, and in Florida the test is who benefits from the trust. Under Florida Statute § 736.0505(1)(b), a creditor of the settlor can reach the maximum amount the trust could distribute to or for the settlor’s benefit, spendthrift clause or not. Section 736.0103(21) makes anyone who contributes property a settlor of the portion they contributed.

An owner who funds a trust for their own benefit therefore gains nothing against a judgment creditor. The creditor reaches the interest inside that trust as readily as it would have reached it in the owner’s hands. Where someone else’s money bought the interest and the trust runs for someone else, the owner’s creditor has no claim on it. Fraudulent transfer law still applies, and Florida’s charging order statute expressly preserves it.

Owners use irrevocable trust ownership to convert a single-member LLC into a multi-member LLC and invoke charging order protection. Florida law limits a creditor’s remedy against a debtor’s LLC interest to a charging order—a lien on distributions that does not grant management control or force liquidation. Section 605.0503(6) makes that limit absolute where the company has more than one member: foreclosure is not available and a court may not order it.

Where the company has one member, § 605.0503(4) lets a creditor ask the court for a foreclosure sale, on a showing that distributions under a charging order will not satisfy the judgment within a reasonable time. An LLC that makes no distributions hands the creditor that argument. Until the creditor makes the showing, the charging order is the only remedy the statute allows.

Bankruptcy is the sharper exposure. In In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003), a sole member’s Chapter 7 filing moved her entire membership interest into the bankruptcy estate. The trustee became the substituted member, and the court allowed him to cause the LLC to sell its property for the estate. The court’s reasoning is the reason a second member helps: a charging order exists to protect the other members, and a single-member LLC has none. The same opinion says the result would have been different if there had been non-debtor members.

An owner making that conversion gifts a small membership percentage to an irrevocable trust created for family members. As with any transfer, the trustee has to be admitted as a member and not merely handed the interest. This adds a second member without requiring an outside business partner.

The trust’s spendthrift provision keeps the gifted interest away from the beneficiaries’ ordinary creditors. It does not stop a support claim by a beneficiary’s child, spouse, or former spouse, and it does not stop a government claim. Section 736.0503 lets those claimants attach distributions as they are made. A continuing trust maintains multi-member status even after the grantor dies because the interest passes to successor beneficiaries inside the trust rather than through probate.

Where the owner has no spouse or business partner available, the owner’s parents can create an irrevocable trust for the owner’s benefit and buy a minority membership interest in the LLC through it. The parents’ money has to buy the interest. If the owner supplies it, the owner is the settlor of that portion, and a creditor of the owner can reach whatever the trust can distribute for the owner’s benefit.

If the parents fund it, the spendthrift provision protects the interest while they are alive, and the trust keeps it out of their probate estate and away from their other heirs. When they die, the share stays in continuing trust for the owner’s benefit, maintaining multi-member status for the life of the trust.

The structure is untested. No Florida decision has counted a family trust as a second member under the charging order statute, and none has refused to. Where the owner is a beneficiary of the trust that holds the second interest, a court could treat the two interests as effectively belonging to one person, which would undo the multi-member status the structure is built to create.

Fraudulent transfer risk increases when the LLC already has substantial assets and the owner gifts a membership interest to a trust without receiving reasonably equivalent value in return. A creditor may argue the transfer was made to hinder collection. A transfer made before any claim exists is far less vulnerable than one made after a lawsuit has been filed or a creditor relationship has formed.

Tenancy by the Entirety Considerations

Married couples in Florida can hold LLC interests as tenants by the entirety, which protects the interest from the individual creditors of either spouse. Transferring a TBE-held LLC interest into a trust raises a real question: does the interest retain its entireties protection inside the trust?

Florida law on this point is unsettled. The two bankruptcy decisions on it part ways without squarely conflicting.

In In re Givans, 623 B.R. 635 (Bankr. M.D. Fla. 2020), the court held that deeding the property to a joint revocable trust ended the entireties estate. The trust held legal title, a trust cannot be married, and the children took an equitable interest. In In re Romagnoli (Bankr. S.D. Fla. 2021), the court declined to decide whether an entireties interest survives inside a joint trust. It protected the trust property on other grounds, because a bankruptcy trustee standing in the debtor’s shoes could reach nothing the debtor could not have reached alone.

No Florida appellate court has decided the joint-trust question. Maryland’s trust code preserves entireties immunity for property conveyed to a trustee, and Florida has enacted no comparable statute.

Florida does have case law on entireties property in trust, and it turns on control. In Passalino v. Protective Group Securities, Inc., 886 So. 2d 295 (Fla. 4th DCA 2004), the Fourth District held that transferring entireties property to a trustee for both spouses’ benefit does not destroy the unities. The spouses there kept beneficial ownership and jointly controlled the property. A Fifth District footnote in Rollins v. Alvarez had said the opposite, on facts where one spouse held sole control. Joint control preserves the estate.

A membership interest is personal property under Florida Statute § 605.0501, and Florida presumes an entireties estate only in real property titled to both spouses. For personal property the couple must establish the six unities and prove they intended entireties ownership. A bankruptcy court sustained that claim to closely held stock in In re Reese, 281 B.R. 735 (Bankr. M.D. Fla. 2002), where the certificate itself recited entireties ownership. The operating agreement and the company’s membership records should say so in terms.

For married couples who want both probate avoidance and entireties protection, one practical approach is to keep the LLC interest as tenants by the entirety while both spouses are alive. A transfer-on-death provision in the operating agreement can direct the interest to the trust when the surviving spouse dies. This preserves entireties protection during life and still avoids probate at death.

Tax Consequences of the Transfer

Moving an LLC interest into a revocable trust is not a gift, because nothing leaves the owner. Gifting an interest to an irrevocable trust is a gift, and a gift to a discretionary trust is a gift of a future interest. The annual exclusion under 26 U.S.C. § 2503(b) does not reach a future interest, so a gift tax return is due under § 6019 no matter how small the percentage. A minority, non-controlling interest also needs a supportable valuation. Income tax is the separate question, and the type of trust controls it.

A revocable grantor trust is disregarded by the IRS, so the grantor continues to report LLC income on their personal return and the LLC’s tax classification does not change. If the LLC was a single-member disregarded entity before the transfer, it remains one afterward. No new EIN is required.

An irrevocable grantor trust is also tax-transparent, so the same generally applies. The critical difference arises when the irrevocable trust is a non-grantor trust. A non-grantor irrevocable trust is a separate taxpayer that needs its own EIN. If the trust is the LLC’s only member, the LLC remains a disregarded entity but reports through the trust’s EIN. If the trust becomes a second member, the LLC may need to begin filing as a partnership.

Banks and financial institutions that hold LLC accounts will need updated documentation reflecting the trustee’s authority. If the LLC holds real estate, the change in membership does not affect the property title, because the LLC owns the property. Documentary stamp tax is usually not triggered either, because a transfer to one’s own trust is a gift for no consideration. Florida Statute § 201.02(1)(b) is worth checking where the LLC took the real estate from the owner within the last three years and the membership interest then moves for consideration.

What the Trust Agreement Should Address

Florida already gives a trustee broad authority over a business interest. Under Florida Statute § 736.0816(7) the trustee may continue the business and take any action a member could take, and under § 736.0815(1)(b) the trustee has every power an outright owner would have unless the trust says otherwise. The drafting work runs the other way: telling the trustee what to do with that authority, and clearing the duties that a concentrated holding puts under strain.

At minimum, the trust should say when the trustee is to sell the LLC interest, how LLC distributions are handled, and that the duty to diversify does not apply to the LLC interest. Florida Statute § 518.11 imposes a duty to diversify and a duty to review and dispose of the investments a trust starts with, and it lets the trust instrument eliminate both. That is the clause a trust holding one closely held company most needs.

For a revocable trust, the grantor typically receives distributions directly. For an irrevocable trust, the trustee holds or distributes funds according to the trust agreement’s terms.

The operating agreement should specify whether a successor trustee automatically steps into the membership role or whether the other members must approve the new trustee. A successor trustee is a different person from the trustee who was admitted, so admission becomes a live question every time the trusteeship changes. If the operating agreement is silent, a trustee change could leave the LLC without a clearly authorized member during the transition.

What Trust Ownership Adds to an LLC

Trust ownership adds two things to an LLC. The interest stays managed through the owner’s incapacity, and it passes at death without probate. Creditor protection is a separate question, and a trust answers it only where someone else funded the trust for someone else’s benefit. The LLC keeps the business’s liabilities inside the business, and no trust can do that part of LLC asset protection.