We usually think of estate planning in terms of wills and trusts, how we pass assets onto our children and who will take care of us when we are unable to take care of ourselves. All of that is true, but if you have a business, there are many additional considerations.
You first must consider your business structure. Do you have a corporation, a limited liability company, or other? Do you have co-owners, or are you the sole owner? If you have co-owners, you should have a business succession plan to provide for a process to either transfer your business interest to co-owners upon your death, perhaps to pass your interest on to your family, or perhaps simply to dissolve and sell the business.
If you are a sole owner, you have to consider a succession plan, often within your own family unit. Do you have a spouse or children who work in the business? Are they capable of running the business? Do they want to take on the business?
For those who are sole owners, a living trust plan is often advisable because the business may be transferred on death without the need for probate or delay of a probate proceeding. For example, if you are the sole owner of a hardware store corporation, and the stock of your corporation is held in a trust, upon your death the stock may be transferred to the named recipient(s) with little delay and little risk to the business. In addition, in the event of your incapacity, who is going to run your business? For many small business owners, their inability to show up at work every day would be fatal to the business. By holding the business asset in a living trust, the business owner may designate a special trustee who has the authority to manage the business in the absence of the business owner. This will ensure continuity, the ability to make payroll, the ability to meet customer orders and so forth.
Let’s assume for a moment that you do not have an estate plan, and you own a business. Then what happens? The law of the state would apply in determining who is to receive your assets and the process by which your estate will be administered. By default, certain persons have priority for the appointment as a personal representative, aka executor, including your spouse and children. If they are not all on the same page as to who should serve, or if they do not all agree to waive a bond, then the court is going to require a bond equal to the value of the assets of the estate. There is no benefit to require a probate proceeding on your death, and probate may be avoided with the use of a living trust-based plan which provides for continuity in the event of incapacity and death.
Silverman Law Offices offers legal counsel and services for estate and wealth planning, trust or estate administration, and probate services. Our vision is to build a firm that provides personalized one-on-one client counseling, state-of-the-art estate-planning tools, ongoing updating and support, and hopefully, a law firm that is both comfortable and comforting to clients and their families and friends.
