The goal of an estate plan for business owners is to ensure that your family business retains its value if it is to be sold, or is passed to the next generation without creating tax burdens.
To make sure that your estate plan is proceeding according to plan, says Farm Futures’ article, “8 signs your estate plan is off track,” keep an eye on these important elements:
- For the business owner, a will is not an estate plan. Wills are efficient estate planning tools, but they are one part of a larger plan. A sound estate plan should have an objective of avoiding probate. A will that’s not properly used often puts the estate into probate, creating delays and expenses.
- Failure to fund a revocable living trust. This can create as many problems as a poorly written will. When assets aren’t properly included in the trust, it can negate the trust’s benefit. Work with a qualified estate planning attorney to review the paperwork and be certain that real estate, intellectual property, certain types of stock, business partnerships, and promissory notes are properly included in the trust.
- Exposed assets. If you have assets held as joint property, it can be an issue if the surviving spouse has a lot of debt. Make certain that these assets are titled correctly and insured properly. Otherwise, debtors could file claims to get at those assets.
- Assets that are given outright to beneficiaries. These assets may be unprotected from creditors, predators, divorcing spouses, lawsuits, outside influences, and an heir's bad judgment. Talk with an experienced estate planning lawyer to help you find the appropriate instrument to protect the asset and deliver it to the intended beneficiary.
- Using family members as successor trustees. If you name family members as successor trustees, you might name two or more co-trustees. If they don’t get along, don't trust each other, or if they disagree with each other's decisions, they could end up in court. You can avoid delays, fights, and possibly litigation by naming a bank or trust company as the primary trustee and family members as co-trustees. This lets the primary trustee resolve issues and save the family time and money.
- Beneficiary designations that are out-of-date. Update your beneficiary designations for annuities, 401(k)s, IRAs or life insurance that you set up a long time ago.
- Too much or too little life insurance. Be sure to review your life insurance regularly. There are plenty of reasons, like changes to federal and estate tax exemptions, policies you purchased to generate income maybe be underperforming, and policies with high cash values may be mature and ready to provide cash flow or to be terminated in favor of other investments.
- Plan for long term care as well as death. It’s not easy to plan for either of these, but many people completely overlook the very real possibility of needing extended care and how they or their families will manage to pay for these costs. A comprehensive estate plan must include planning for an illness that requires care in a nursing facility or diminished mental capacity.
A unique feature of Legacy Counsellors, P.C. is our Continuous Care Program. We know that life is an organic journey, our assets grow, our goals change, relationships are forged, etc. Please call our office today to schedule an initial consultation to create a unique estate plan. (413) 527-0517
Reference: Farm Futures (October 25, 2016) “8 signs your estate plan is off track”