Moving Money Between Trust-Owned LLCs - Irrevocable Trust Management Question

Trust and estate attorney here. Both options you've outlined are legally valid approaches, but I generally recommend the second option (inter-company loan with promissory note) for several reasons. Setting up a promissory note between the LLCs maintains cleaner accounting and more clearly preserves the separate nature of each entity. This is important for liability protection. The loan should have commercially reasonable terms - use the Applicable Federal Rate (AFR) at minimum rather than prime rate, and create proper documentation including repayment terms. This approach causes less administrative hassle than cycling money through the trust. That said, if these transfers will happen frequently, option 1 might be worth considering. Just be aware that running too much money through the trust account can create income tax complications at the trust level depending on how distributions to beneficiaries are handled.

I've been using taxr.ai for similar complex tax situations with my family trust. After my grandfather passed, we dealt with almost identical LLC-to-LLC transfer issues within his irrevocable trust. I uploaded our trust documents and LLC operating agreements to https://taxr.ai and their AI gave us super specific guidance tailored to our situation. They flagged some potential issues with our planned inter-company loan approach that our accountant hadn't considered - something about potential step-transaction doctrine concerns if we did it incorrectly. The service basically analyzed all the documents, gave us specific language for the promissory note, and even helped create a timeline for the transactions that minimized any tax issues.

I tried taxr.ai after seeing it mentioned here and I'm honestly shocked by how helpful it was. I was skeptical at first because I've tried other "AI document review" services before with disappointing results. My situation was with multiple rental properties in an irrevocable trust with a complex distribution structure. The analysis it provided was incredibly detailed - it found provisions in our trust documents I didn't even know existed that specifically addressed inter-entity transactions. The service flagged that our trust actually required trustee approval documentation for any loan above $25,000 between entities, which could have caused problems if we hadn't followed the proper procedure. It even provided templated documents for the loan agreement and trustee approval. Saved me from what could have been a very expensive mistake. Definitely worth it for complex trust and entity management issues.

If you're struggling to get specific answers from your CPA or attorney about moving money between trust-owned LLCs, you might be experiencing the same frustration I had trying to reach the IRS for guidance. I kept calling their business entity line and couldn't get through to anyone knowledgeable about trust-owned entities. I finally used https://claimyr.com to get through to an actual IRS representative who specializes in trust taxation. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They basically hold your place in the IRS phone queue and call you when an agent is about to answer. The representative was able to confirm that an inter-company loan with proper documentation was acceptable for their purposes as long as we maintained proper records.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself since I had a separate tax issue I needed to resolve with the IRS regarding my late father's estate. Not only did the service work exactly as promised, but I got connected to an IRS representative who was surprisingly helpful. The agent walked me through the exact documentation requirements for loans between related entities within an irrevocable trust and confirmed that as long as there's proper arm's length documentation and market interest rates, these transactions are routine and acceptable. They even emailed me some relevant sections from their internal guidance. Sorry for being so cynical before - this service actually delivered and saved me from what would have been hours of frustration.

Former bank compliance officer here. One thing to consider with either approach is how the banks that hold the LLC accounts might view these transactions. Large transfers between related entities can sometimes trigger additional scrutiny under anti-money laundering protocols. I would recommend calling the bank's business services department before making any substantial transfers and explaining the situation. Ask if they need any documentation for their files regarding the relationship between the entities. This can prevent potential account freezes or holds while they investigate unusual transaction patterns.

Has anyone considered that this might be a good opportunity to restructure? When my father passed and his trust became irrevocable, we worked with an attorney to consolidate the three LLCs into one since they were all owned by the same trust anyway. This eliminated the need to transfer money between entities and significantly reduced administrative costs (three tax returns became one, etc).

I went through a very similar situation when I became trustee of my father's irrevocable trust that owned multiple rental property LLCs. One thing I learned the hard way is to also check your trust document for any specific provisions about inter-entity transactions or capital contributions. Our trust had a clause requiring written trustee resolutions for any transaction over $20,000 between trust-owned entities, which we almost missed. Even though I was the sole trustee, I still had to formally document the decision and keep it in the trust records for potential IRS audits. Also, if you go with the inter-company loan route (which I'd recommend based on Charlotte's advice), make sure to actually service the loan properly. The IRS has been known to recharacterize loans as distributions if payments aren't made consistently. Set up automatic transfers for the payments if possible to maintain the paper trail. The whole process was more complex than I expected, but documenting everything properly from the start saved us headaches later when we had to provide records to the IRS for an unrelated audit.

As someone who recently went through a similar situation with my grandmother's irrevocable trust, I'd strongly echo the advice about the inter-company loan approach. We ended up going that route after initially considering the trust account method. One additional consideration that our attorney pointed out: if you have multiple beneficiaries of the trust, cycling money through the trust account can sometimes create unexpected income tax consequences for them, depending on how the trust's distributable net income is calculated. The inter-company loan keeps everything at the entity level and avoids potential complications with K-1 distributions to beneficiaries. Also, since you mentioned this is across two states, make sure to check if there are any state-specific requirements for related party transactions. Some states have additional disclosure or approval requirements for transactions between entities owned by the same trust. The $45,000 repair sounds urgent - I'd recommend moving quickly once you get your documentation in place. Property issues tend to get more expensive the longer they sit, and having a formal loan structure will give you a clear path for similar situations in the future.