Hi. Lee Philips again.
Yep it's me.
I want to talk to you for two seconds about a
question that I often get.
if I set up a living revocable trust,
then I have to have the trust own my assets
in order to actually have the trust avoid probate when I die.
And the object of the trust
is to avoid probate.
And it's a legal trick
and I've talked about that in other YouTubes.
But if I have if I have my trust
and I set up an LLC or a corporation
this company is going to have a bank account
and I'm going to sign my name for it.
Well I can tell you that everything that you sign your name for
has to be owned by the trust
in order to avoid probate when you die
so the question comes up
and I get it more frequently than I would think
Do I have to put my company's bank account
checking account
in the name of my trust so that when I die
the bank account isn't probated?
And the answer is kind of obvious to me but
it's confusing to a lot of people I guess
no the bank account is the company's bank account.
it is not your bank account.
You are signing your name
for the company bank account but
you're not signing it in your individual capacity,
you're signing it as the officer, director, or the manager of the LLC
or the officer, director of the corporation, the company
so you're signing this one on behalf of the company
but wait
who signs your name after you die
to get into that bank account?
Well, your operating agreement for your LLC or your bylaws for your corporation
are going to say how we get a new manager
or a new officer director
new president of the company
when the president of the company dies.
How do we get a new guy?
Usually the shareholders get together
and they elect a new guy
and they have to have notice and they have to do all this and that the other stuff
so we get a new manager
but wait
you own 90% of the stock.
You're dead.
How are you gonna vote?
You're not.
But you gotta sign your name on the ballot
in order to vote.
The catch is the company,
the stock in the corporation, the membership interests in the LLC,
the papers at the state.
They all have to be in the name
of your trust
so that the company itself
is owned by the trust
or at least your interest in the company
is owned by the trust.
And if I'm one member
and I've got another guy who's 50% member
we're 50/50 or I'm 51 he's 49
I need to make sure that his interest
is held in a trust
because
if he dies my company
is gonna be tied up in probate for a couple of years
when we figure out what to do with his 49%.
Now you can alleviate a lot of this
by writing things into the operating agreement
or the bylaws
but the basic concept is
your trust has to own the company.
And of course if your trust owns the company
and the company owns the bank account
there's no probate.
So can you see
indirectly your trust does own the bank account
but not directly.
It just owns the company which owns the bank account.
Hopefully that clarified it a little for you
and you can see the relationship between your living revocable trust and
the bank account of your LLC or your corporation
and lawyers always forget
not always, that's an absolute
but lawyers often fail to say,
"You know, your interest in your company
needs to be owned by your trust
so that when you die
the company doesn't have to go through probate."
And the fact is
if the company gets caught in probate
the chances of it dying
are considerable
because you got to have the court's approval you gotta do all this crap
and it takes two years
and by that time the company has lost its traction
it's if it's a doctor's office,
practice,
they've lost all the patients
the company, the practice becomes worthless.
The company dies.
So it's critical
that you understand this relationship
between your living revocable trust
and your company
your LLC or corporation your limited partnership
whatever it is
This is Lee Phillips
talking about company bank accounts, I guess
and ownership of your company.