The best way to reduce estate tax is to use "life insurance" tool.
For need based financial aid application - By theory, even the asset is in LLC, you should report it. Sometimes it takes more effort to track so parents can "hide" the asset in LLC and the schools do not check it. The best way is to have the money in all type of retirement accounts (401k, IRAs and if you have more $$, annuity) and your primary property (for public universities and some private schools) which can't be partial of asset when considering family contribution factor.
Portfolio size in each LLC - Read jy101's post.