If you are a small business owner, do you have plans in place to take care of your business and/or minimize estate taxes in the event of your incapacitation or death? For most small business owners today, the answer to this question is no. But, this article discusses why the answer should be yes and why estate planning for small business owners is extremely important.

Why Estate Planning is Important

For Small Businesses

Small business owners have a more complicated situation when it comes to estate planning because they have a business to think of and must plan for the continued operation of that business in the event they become incapacitated or die.

Your business is probably your largest single asset. Therefore, it needs to be integrated into your overall estate plan. Integration with your estate plan is important for several reasons, but most importantly:

1. To ensure the continued operation, management, or transfer of the business in your incapacity or upon your death; and
2. To minimize estate transfer taxes.

Ensuring The Continuation

of Your Business

Consider this––what would happen to your business if you become incapacitated and not able to run the business, handle payroll, sign checks, and manage the business on a day-to-day basis? Who’s going to do these things in your absence? Is there presently a plan in place that gives this person lawful authority to run your business?

Furthermore, what happens if you die unexpectedly while still owning the business? There will probably still be value in the business, but how will it continue to be operated, passed on to others, or sold so that your family can benefit from the hard work that you put into it over the years? Should this happen, is there a plan in place that will work under the law to carry out your wishes?

For most small business owners there is no proper plan in place and this is can be a huge problem, especially if much of your net worth is tied up in the business.

Minimizing Estate Transfer Taxes

According to some studies as many as 70% of small and family-owned businesses fail to survive from one generation to the next. For some small businesses, a significant reason for this is the IRS and the crushing impact that estate taxes can have on that business’s future when the IRS comes calling.

The estate tax rate can be as high as 40% and, absent any deferral, will be due 9 months from the death of the business owner. This means that a taxable estate with a worth of $6 million dollars would incur an estate tax of $2.4 million, which would be due in 9 months. This is like a hidden liability on the business’s balance sheet. Fortunately, the estate tax exemption is high right now, but is subject to change based upon the political winds.

It’s difficult enough for a small business to compete and grow in today’s competitive environment, but how much more difficult will it be for a small business to generate that much liquidity in that short amount of time?

As a business owner, you owe it to yourself and your loved ones to make sure that you have plans in place to ensure the continued operation, management, or transfer of the business in your incapacity or upon your death and to minimize estate transfer taxes.

How An Experienced

Florida Estate Planning Attorney

Can Help

Fortunately, there are significant estate planning strategies available to help small business owners in Florida achieve their estate planning goals. Some examples include:

• Powers of Attorney – allows you to name someone with the business savvy to effectively manage your business and protect your interests when you are incapacitated.
• Partnership Agreements – can be useful when there are multiple partners involved in the business. Such agreements can pre-determine what should happen in case of death or retirement of one of the partners.
• Trusts – can allow your business interest to be transferred to your beneficiaries after you die, without any delay or bureaucracy and without any disruption to the business.
• A Buy/Sell Agreement – will allow business stakeholders to retain or assume control of your business after you die, while also allowing you to pass on your own stake in the business to your beneficiaries.
• A Cost Effective Insurance Policy – when combined with your buy/sell agreement, can provide you with both the method and the means to implement and fund your intentions.

An experienced estate planning attorney can show you not only how to use these tools to ensure the continued operation of your business and minimize estate transfer taxes, but can also help you integrate them into your overall plan in a way that accomplishes all of your estate planning goals.

Contact Lynchard & Seely, PLLC:

Florida Estate Planning Attorneys

For more information regarding estate planning for small business owners, contact an experienced Florida estate planning attorney to arrange a free consultation where you can discuss how to protect your business and meet your estate planning goals. Contact Lynchard & Seely, PLLC,  either here online or by calling 1-850-936-9385, to arrange a consultation with one of our expert Florida estate planning attorneys.

Not many people need to be concerned about leaving their adult children so much money that they might easily choose to become lazy and do nothing with the rest of their lives. But, it’s not uncommon for some parents to be concerned that their adult children/grandchildren may waste their inheritance on drugs, alcohol, and fast living, or lose it gambling, have it taken by creditors, or have a spouse take all or a portion of it in a divorce settlement.

However, holding property in trust for your adult children/grandchildren can protect it from their creditors and spouses, and keep it from being squandered away. What’s more, the property you place in the trust will avoid probate and some taxes.

But, like most things in life, holding property in trust has its advantage and disadvantages, and those can factor into whether or not it’s a good idea for you. This is why it’s important that before you decide to hold property in trust for your adult children/grandchildren, you should understand the pros and cons of doing so.

The Pros

• Trusts Offer a Lot of Protection

If you need to keep a financially irresponsible child from squandering his or her inheritance, or protect a child’s inheritance from being allocated to creditors during a bankruptcy or to his her spouse in a divorce proceeding, a trust is flexible enough to help facilitate all of this and more.

For example, if your child has a car accident and is sued for $100,000, a court cannot force the trust funds to be used to pay the judgment. In addition, if your child gets laid off from work for any reason and ends up in bankruptcy, the court cannot liquidate any assets held in the trust.

Likewise, if your child gets divorced, his or her spouse will have no claim against the assets in the trust. What’s more, when your child dies, the property held in the trust will be inherited by his or her children, your grandchildren or, in some cases, to whomever your child chooses. But, it won’t go to his or her spouse, who might then remarry and give it their new spouse, leaving your grandchildren with nothing going to yours.

• Trusts Avoid Probate and Offer Quicker Resolution

Any assets held in your name and for which the ownership does not automatically transfer when you die will be subject to probate. Assets you hold in trust will avoid probate because they are legally owned by the trust, not you.

Furthermore, probate can last for months and even years and drain the estate’s assets with court costs and attorney’s fees. But, since assets you place in a trust avoid probate, a trust can ensure that its beneficiaries inherit quicker, saving them both time and money.

• Trusts Avoid Guardianship

It can be a nightmare if you suffer a mental or physical setback that renders you incapable of handling your personal or financial affairs. If you don’t have the proper documents in place, a court will appoint a legal guardian to handle your affairs. But, if you don’t want a court making this decision, the right kind of trust will allow you to decide for yourself who will manage your estate in the event you are unable to do so.

• Trusts Are More Difficult to Contest

We often hear about a person’s last will and testament being contested by disgruntled or disinherited family members. However, we don’t hear this about trusts so often because they are much more difficult to contest. This can be a real benefit if you are concerned about making sure that your wishes carried out.

• Greater Privacy

Unlike probate proceedings, trusts don’t require you to file anything with the court. This ensures a great deal of privacy because your trust’s affairs will not be available for public scrutiny.

The Cons

• Trusts Are More Complex

Because trusts are complex, you will need the assistance of a qualified attorney to ensure that it is set up properly and does what you want it to do.

• Trusts Can Be Expensive

Because you need an attorney’s help to set up a trust properly, they can be expensive. In fact, this expense, along with the cost of transferring assets into the trust, can cause them to be much more expensive than having a will drawn up.

• Trusts Require More Attention and Detail

The instructions you give your trust should be well thought out and every step should be detailed. Furthermore, the language that you use should be carefully considered to ensure that it does what you want it to do.

• A Trust Does Not Eliminate The Need For a Will

There will almost certainly be assets that you don’t want (or need) to put in your trust. Therefore, you will still need a will to account for the distribution of these assets.

Ultimately, everyone’s situation is different, so it’s almost impossible for someone else to say whether or not you need to hold property in trust for your adult children/grandchildren, at least without first reviewing your circumstances. Even so, the benefits of holding property in trust should at the very least inspire you to inquire more about using a trust as an effective estate planning tool.

Contact Lynchard & Seely, PLLC:

Florida Estate Planning Attorneys

Our estate planning attorneys would love to discuss the pros and cons of holding property in trust for your adult children/grandchildren and how it can be incorporated into your overall estate plan. To learn more, contact Lynchard & Seely, PLLC,  either online or by calling 1-850-936-9385.

You have worked hard to accumulate the assets you own and if you are like most people, you want to leave behind as much of those assets to your loved ones as possible. But, how you choose to transfer those assets to your loved ones can have a huge effect on how much they ultimately receive.

There are various ways to transfer assets to your loved ones. But, essentially, they all boil down to either transferring the assets before you die or transferring them after you die.

Transferring Assets Before You Die In Florida

There are essentially two ways to transfer assets to your loved ones before you die in Florida:

1. Gifts; and
2. Living Trusts

Gifts – A gift can be given unconditionally to the intended beneficiary. Once the asset has been given away, you will no longer retain title to the asset and the recipient becomes the owner. Gifting can be used by individuals with large estates to avoid the federal estate tax consequences associated with the transfer of wealth from one person to another.

Living Trusts – A living trust may be set up during your lifetime to take ownership of your assets and then distribute them to certain beneficiaries. Apart from facilitating a transfer of assets from you to your heirs, a living trust may also be set up for a variety of other reasons, for example:

• To control and protect family assets from creditors; or
• To have assets managed for beneficiaries who are too young, incapacitated, or otherwise incapable of handling their own affairs.

After you set up a living trust, you will need to transfer assets to the trust. The trust assets will then be managed by someone you nominate as trustee and distributed to the trust beneficiaries according to your specific instructions, for example with regard to how frequently the assets and the income derived from assets are to be distributed.

Transferring Assets After You Die In Florida

There are also essentially two ways to transfer your assets to your loved ones after you die:

1. Through the probate process; or
2. By using trust substitutes

Transferring assets through the probate process – This involves the use of either state intestacy laws or a Will, both of which will require your estate to be probated. But, probate can be long, costly and confusing. This is why so many individuals put measures in place to avoid probate and save their families the trouble.

Transferring asset using trust substitutes – The use of estate planning tools, such as rules of survivorship, Pay-On-Death or Transfer-On-Death designations, and government savings bonds, as well as, insurance policies and retirement accounts can be very effective ways of transferring assets to loved ones after you die while having those assets avoid probate.

How Should I Transfer Assets To My Loved Ones?

When determining the best way to transfer assets to your loved ones, you should consider the following questions:

• Who and what matters to you? Do you have children, aged parents, grandchildren, or other family members who depend on you? Is there a cause or organization that matters to you a great deal?

• How long will the assets be needed to sustain your loved ones? If you have minors who are dependent on you, what are their ages and needs? Who will you entrust their care to?

• Do you have any liabilities? What happens if you don’t have sufficient funds to pay your liabilities in the event of your premature death? Will your assets need to be liquidated to pay your debts? How can you ensure that your liabilities don’t become a financial burden for your beneficiaries?

• What guarantees do you have? How can you ensure that your assets will be distributed to your loved ones according to your wishes?

• What are your options? What are the various options you have to transfer your assets to your beneficiaries in the most efficient and effective manner in terms of time and money?

Planning for the transference of assets to those you will leave behind when you die is an essential aspect of estate planning. To understand the advantages and disadvantages of the various ways you can transfer assets to your to your loved ones and how each will affect the ultimate value of the estate you leave behind, consult with an experienced Florida estate planning attorney.

Contact Lynchard & Seely, PLLC:

Florida Estate Planning Attorneys

For assistance with this and other estate planning matters in Florida, contact Lynchard & Seely, PLLC, either online or by calling 1-850-936-9385, to arrange a consultation with an experienced Florida estate planning attorney who can explain your options and guide you through the process.