If I put my LLCs in a trust, how does that affect probate, estate taxes, and who manages the businesses if I’m unavailable? – North Carolina

Short Answer

In North Carolina, placing LLC ownership interests into a properly created and funded trust can reduce what must go through probate because the trust, not the individual, owns the LLC interests at death. But putting LLCs into a trust usually does not eliminate estate taxes because a revocable trust is typically still treated as part of the taxable estate for federal purposes. For management, a trust can be very helpful: a successor trustee can step in to exercise the trust’s owner-level rights, but the LLC’s operating agreement still controls many day-to-day management rights and may require member consent for a trust to become a full “member.”

Understanding the Problem

In North Carolina estate planning, a common question is: can an LLC owner place LLC ownership interests into a trust so that the interests do not have to pass through probate, and so that someone can manage the business if the owner becomes unavailable. The decision point is whether transferring the LLC interests into a trust changes (1) probate administration at death, (2) estate tax exposure, and (3) who has legal authority to act for the owner’s business interests during incapacity or after death.

Apply the Law

North Carolina generally allows a trust to own personal property, including business interests, if the transfer is completed using the required formalities. When a trust owns an LLC interest, the trustee acts as the legal owner for trust administration and can often sign documents, vote, and make owner decisions—so long as the trust document grants appropriate powers and the LLC’s operating agreement allows the trustee (or trust) to exercise member rights. Separately, North Carolina no longer imposes a state inheritance tax and the former state estate tax has been repealed, but federal estate tax rules may still apply depending on the size and structure of the overall estate.

Key Requirements

• Proper “funding” of the trust: The LLC interests must be transferred into the trust using the correct transfer document(s) and any steps required by the operating agreement (for example, updating membership schedules, obtaining consents, and delivering notice).
• Authority for the trustee to operate or hold business interests: The trust should grant the trustee powers to hold concentrated business interests, continue a business, and hire managers and advisors so the trustee can act without having to ask a court for routine business decisions.
• Operating agreement alignment: The operating agreement must be reviewed because it may restrict transfers, limit an assignee’s rights, or require other members’ consent before a trust is treated as a full member with voting/management rights.

What the Statutes Say

• N.C. Gen. Stat.  32-27 (Fiduciary powers incorporated by reference) – Allows a trust instrument to incorporate broad fiduciary powers, including power to continue a business and to hire professionals, which can be critical when the trust owns LLC interests.
• N.C. Gen. Stat.  105-1.1 (Inheritance tax repealed) – Notes that North Carolina inheritance tax provisions were repealed effective for deaths on or after January 1, 1999.
• N.C. Gen. Stat.  105-32 (State estate tax repealed) – Indicates North Carolina’s estate tax provisions were repealed effective for deaths on or after January 1, 2013.

Analysis

Apply the Rule to the Facts: Because no specific facts were provided, the key variable is whether LLC interests are actually transferred into the trust during life (not just referenced in a will). If the trust becomes the owner on the LLC records and the operating agreement requirements are satisfied, the LLC interests generally pass under the trust at death instead of through the probate estate. Even with a trust, federal estate tax exposure usually depends on overall estate size and tax rules, not just whether an asset is owned by a trust.

Process & Timing

1. Who acts: The LLC owner (as settlor/grantor) and the trustee. Where: Primarily outside court, using the LLC’s internal records and the trust documents; if probate is needed for other assets, filings go through the Clerk of Superior Court in the county with proper venue. What: A trust agreement, an assignment of LLC interest (or similar transfer document), and any operating-agreement-required consents or updated schedules. When: Ideally while the owner is alive and has capacity; waiting until death defeats the main probate-avoidance purpose for that asset.
2. Operational step: Update the LLC’s membership ledger/schedule and keep the trust’s ownership documentation with the company records. If the operating agreement restricts transfers, obtain required consents before signing, and document delivery/notice.
3. Incapacity and succession step: Name a successor trustee in the trust and ensure the trust grants business-management powers. If the owner is also the LLC manager, align the operating agreement’s manager succession provisions with the trust plan so there is no gap in authority.

Exceptions & Pitfalls

• Operating agreement transfer limits: Many operating agreements restrict transfers to a trust or treat the trust only as an “assignee,” which can limit voting and management rights until member consent is obtained.
• Mismatch between trustee powers and real-world business needs: If the trust does not clearly authorize continuing the business, retaining concentrated holdings, and hiring managers/advisors, the trustee may hesitate or may need court involvement for major decisions.
• False sense of “no taxes”: Even though North Carolina has repealed its inheritance and estate taxes, federal estate tax and income tax issues can still apply. A tax attorney or CPA should review the overall plan before transfers are finalized.

Conclusion

In North Carolina, placing LLC ownership interests into a properly funded trust can reduce what must pass through probate because the trust can own the interests and control how they pass at death. North Carolina does not impose a current inheritance tax and has repealed its state estate tax, but a trust transfer often does not eliminate federal estate tax exposure. The next step is to complete an assignment of each LLC interest into the trust and update the LLC’s records (and obtain any required operating agreement consents) while the owner has capacity.

Talk to a Estate Planning Attorney

If you’re dealing with how to place LLC interests into a trust while keeping probate, tax, and business-control issues aligned, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.