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Richard, Attorney
Category: Business Law
Satisfied Customers: 53703
Experience:  32 years of experience practicing law and a businessman.
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My 88 years old mother cashed in 400K in paid up annuities

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My 88 years old mother cashed in 400K in paid up annuities and put the money in the stock market. Her 4 boys now manage her finances. She generates enough earnings to gift 13K to each boy and cover her tax liability each year. The earnings have the potential to earn 100K additional per year due to investments. The thought is to start a LLC and put the additional earnings into the LLC and then distribute the monies in 5 equal shares. I understand that any distribution taken by an individual is taxed at the end of the tax year at 15%. Can you give me the basics of what can and cannot be done. What are the does and dont's for setting up and what are the responsibilities of each individual.

Good afternoon. I really see no reason to put this in an LLC. First, an LLC is not a taxable entity, it flows through to the owners and if the grandmother wants to distribute the additional income to the kids, she can do that directly. There is no additional 15% tax that would accrue. She has a lifetime gift exemption over and above the annual exclusion amount, so there would be no gift tax involved no matter what she does. I simply don't see any thing that is accomplished with the LLC.



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