If a small business owner becomes disabled or dies without
an estate plan (or at least a will), chaos can result. There
are many sad stories of family fights and legal battles about
how the estate of a small business owner will be divided up.
Many of these problems can be avoided.
The
basics -- “Your Will”
In your will, you designate a personal representative (also
known as an executor or executrix) and direct how you want
your affairs handled.
A
will greatly eases the handling of your affairs for your survivors. With
a will, there is still some “probate” (court
administration and oversight) of your affairs. Without a will,
the court is involved in every detail of your estate and the “probate
process” is a nightmare.
You have better insight than a court into:
- who should inherit your property;
- which of your relatives or friends will best be able to care
for your children; and
- how your business affairs should be handled.
In addition to a will, consider:
Revocable
Trust
Establishing a “revocable” trust further eases
the administration of your estate and minimizes the burden
of probate. “Revocable” means that you can
revoke or change it while you are alive. Trusts are effective
estate
planning tools to reduce estate tax liability and can enable
your assets to be distributed over time to your heirs exactly
as you wish. Further, a trust can enable the effective
management transition of your business interests.
Durable
Power of Attorney
Provides instructions and appoints your selected person to
act for you in the event of disability or incapacity.
Health Care Proxy
Provides instructions and appoints your selected person to
make health care decisions (what treatments you want or don’t
want) in the event that you are unable to speak for yourself.
Living
Will
Specifies your wishes regarding artificial life support and
pain management, for use by your Health Care Agent or if
your Agent is unable to work on your behalf.
Declaration
of Homestead
Protects your principal residence in Massachusetts from the
claims of creditors to the extent of $300,000.
Business
Succession Plan
More extensive planning is needed for a business to make a
successful transition. At a minimum, a buy/sell agreement
amongst the co-owners of a business is needed to provide
for the orderly transfer of a business on the death or disability
of one of the owners.
If
the small business owner’s will or trust says, “equal
shares to my children,” there can be a disaster in the
making. A “fight amongst the kids” is the likely
result. There are ways to equalize the relative shares that
each of the children receives, while avoiding the potential
for a power struggle in the business.
If
your will and estate planning documents were prepared years ago, they need
to be reviewed and updated. Don’t wait
for a crisis to address these important matters.
Jean D. Sifleet, Esq., CPA
Business Attorney & Consultant
120 South Meadow Road
Clinton, MA 01510
t. 978-368-6104
f. 978-368-6105
jean@smartfast.com
www.smartfast.com
P.S.
It is also recommended that buy/sell agreements be “funded” with
life and disability insurance.
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Jean Sifleet, business attorney, CPA and three-time entrepreneur, is pleased to announce the release of her new book, Advantage “IP”: Profit from Your Great Ideas. Visit the Smartfast Bookstore for details, and to order the book.
