Many people avoid preparing an estate plan because of unsettling thoughts and fears of death. Yet estate planning is necessary for anyone with children, a business, personal assets, or items of sentimental value that they want to pass along to designated family members, friends, or charities after their death.
An estate plan is a comprehensive and legal plan to distribute all of your property, both real and personal, including your personal effects, clothing, financial accounts, business interests and more. It should include directives for incapacity as well as guardianship appointments for minors or children with disabilities.
It is hard-wired into our survival instinct to always think about living and never about death and incapacity, so we never consider an estate plan to be top of mind. People have a tendency to believe they have unlimited time to think about their future and estate planning. Because the future is uncertain, there are many benefits to creating an estate plan sooner rather than later. We must face the reality that we can’t predict the future and unexpected illnesses and accidents can occur at any time. Addressing your estate plan early on can provide significant relief and peace of mind, knowing that you have a plan in place should the unthinkable (but inevitable) happen.
An estate plan can help to ensure that your business and personal assets avoid probate, which is a needlessly costly, public and time-consuming judicial process. Moreover, by creating an estate plan, you retain control over what happens to your business and other assets after you die or become incapacitated, rather than delegating those decisions to a probate judge.
If you are a business owner, you may often be too busy juggling the tasks of running your business, raising a family, and dealing with the daily demands of life. Fitting in time for future planning may seem impossible. Although we can’t predict the future, we can plan for it. A financial power of attorney involves appointing a trusted individual to handle your finances after death, or if you can no longer make because of decreased capacity, either physical or mental. As a business owner, your situation will of necessity, be more complicated than that of a salaried employee. So thinking long-term is essential to the survival of your business. A health care power of attorney allows a trusted delegate to make medical decisions if you are unable to express your wishes regarding treatment.
A living trust is a legal document that you create while you are still of sound mind. This legally binding document will provide directives involving your assets and naming either a legal entity or person of your choosing (or you, yourself, while living) as the trustee. This will ensure that no matter what happens to you, the assets that keep your business running will be protected and will be controlled by the people you trust. Ensuring that your living trust is always up to date will ensure that your evolving business assets remain protected over time.
Succession planning is a way to ensure a seamless transition of business operations, management and ownership to partners, future generations or successor owners. For a partnership business, it is important to create a succession plan as part of your estate plan to ensure that whoever replaces you as a business owner is someone you fully trust. By creating a succession plan in advance, you can provide stakeholders with the expectation of a smooth transition consistent with the company’s ongoing mission and vision.