What Kind of Estate Plan Makes the Most Sense for You?
An estate plan consists of a series of legal documents and legal and financial arrangements that are assembled in a particular way. This arrangement is designed to accomplish your objectives with regard to the use and distribution of your assets, including your business, for yourself, in the event of your incapacity, and for your heirs in the event of your death. It also includes provisions for transfer costs, taxes, debts and creditors as well. In the absence of an estate plan that establishes your estate objectives state law and the courts will determine how your assets are handled and disposed of and to whom, how and when they will be distributed.
Estate owners, particularly those who own a business, who care about what happens if they become incapacitated or when they die, take some time to do some estate planning. Every estate plan is unique because you, your business and your family are unique. There is no, one size fits all for an estate plan. Although many estate plans are composed of similar elements, such as wills and trusts, each plan addresses a specific person, business and set of heirs. So the question becomes what kind of estate plan makes the most sense for you? What combination of wills, trusts, property titling arrangements, beneficiary designations, powers of attorney and payment orders best serve your interests and the interests of your family. Which plan results in the lowest amount of transfer costs and taxes? The process of estate planning answers these questions and results in the creation of a plan will accomplish your objectives. Generally speaking, no one, particularly those of us who own a business, can do estate planning on our own. You need to work through this process with a professional. The estate planner knows what questions to ask and can make recommendations based upon the answers you give to those questions.
Articles posted here on cosemindspring need to be brief and concise. So I can't elaborate to much more. But what follows is a partial list of some of the questions you would be asked to answer or consider in an estate planning exercise. Reviewing these questions may give you more insight into the importance of creating your own estate plan.
What are your objectives? What would you want to happen with your money, assets, including your business and your heirs if you became incapacitated during your lifetime or when you die?
Who should handle you business, legal and financial affairs if you become incapacitated? Your spouse does not have this authority unless it is given to him/her. What authority should such a person have and how limited or unlimited should that authority be?
If you have minor children, who will become their guardian if you they were orphaned? Should the guardian be limited to the physical and mental care and well-being of the children or have authority over the assets left for the benefit of the children as well? Should orphaned children receive their inheritance when they reach age 18? Should grandchildren who become heirs to your estate inherit assets when they are age 18?
Do you have heirs who have disabilities or other special needs? Do any of your heirs have personal problems that require special handling for an inheritance?
Who will run your business if you are sick, hurt or otherwise incapacitated? Is there a person who could actually step in and keep things going? If the business collapses under these circumstances what impact will it have on your family and how can you protect them?
Who is obligated to pay you debts, including business obligations, in the event of your death? What impact would this have on your family and your business? Where will the money come from to handle these obligations?
Can your heirs or a trustee run your business if you are incapacitated or when you die; if so, is he willing and available to run the company? If not, is there some one who you can find to step in? What authority should that person have?
If you where incapacitated, or died, would your key employees stay with the company? If not, what impact would that have on the value of the business? What can you do to retain these people under these circumstances?
What arrangements have you made with your partner about the death or disability of either of you? What about the divorce of your partner or his insolvency or bankruptcy?
How much will it cost to transfer your assets to your heirs and where will the money come from? Is it possible to reduce or even eliminate some of all of these costs and taxes?
How will your estate plan deal with disputes that may arise among business partners, heirs or other interested parties? How do you keep a business in a family for a second generation of family ownership? How do you do this when there is only one business and several heirs?
These questions and many more are the subject matter of estate planning. The estate planner and the estate planning process provide both the questions and the answers. If any of the foregoing is important to you, you may want to set some time aside for estate planning. Estate planning does not have to be time consuming or expensive. Some estate plans are very simple and straight forward and cost very little to implement. Others, of course, cost more and require more time. What is important is to create the plan that makes the most sense for you; the plan that protects you, your family, your business and other assets with the least amount of tax and as little cost as possible.
