Why Completing Your Estate Planning is a Must!

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Growing your business can be one of the most rewarding experiences for you and your family. It can provide a stream of income for years to come. Part of being successful in business is planning for the unexpected, anticipating what can go wrong and have contingency plans. On a personal level, you should be taking the same approach. For example, do you have life insurance (especially if you have loved ones) to support your family if something happens to you? I know in my situation with three girls and my wife I want to make sure they are taken care of if something should happen to me (hopefully a lot later than sooner). Having life insurance was something I had in place right after I was married over 16 years ago.

What I have found over the years is the big areas that create the biggest mess; when a business owner does not get around to completing their estate planning and something unexpected happens to them. This creates a financial mess for the family that is left behind. It is hard enough to handle the sudden loss of a loved one but to add on the financial turmoil can be just devastating for your loved ones. Especially when the IRS gets involved with estate taxes that will be due that may cause unnecessarily to liquid assets at a fire sale point of view to pay the
estate taxes.

Here are my top reasons why your estate planning should be a must to complete in the next 30-60 days and for you to take immediate action after reading this article otherwise it may be 12 months from now and you have not started yet.

1.Take care of your family. Your spouse must be prepared financially and emotionally as best as possible to make sure if something happens to you what the steps are financially..

Certainty and financial security are very high needs, especially guys for your wives. Don’t leave your spouse left holding the financial bag and having to work with other family members and in- laws to figure how what should happen next. Especially, if you run the business, provide the revenue to support your family and your wife runs the household, kids’ schedule and school (which is a much harder job by the way, in my opinion). This is even more of a must if you are in a second marriage and there are your kids and your spouse’s kids.

You may inadvertently have your net worth not go to your kids when you thought it would. Even worse, what happens to your kids if something happens to both of you? What directives do you have in place to take care of your kids? Do you have guardians in place? Here are six mistakes that happen in this key area of naming a guardian 1) they name only one person with no back-up; 2) they name a couple without directing what should happen if something happens to one of the partners of the couple; 3) they consider financial resources of their guardians instead of leaving enough behind through insurance or savings; 4) they don’t name anyone to take care of their financial resources for their children; 5) they name only guardians for the long-term and don’t consider what would happen in the immediate moments or hours after an accident until their long-term guardians could arrive; and 6) they fail to exclude anyone they know they would never want to serve as a guardian. If you die without a Will or having named guardians, the decision as to who will take care of your money and your children is left up to a State Court Judge operating in a broken court system who don’t know you or what’s important to you.

Another challenge is having your estate go to the probate courts because you have no estate plan in place. Here is how this works. In any jurisdiction in the U.S. that recognize a married couple’s property as tenancy by the entireties, if a person dies intestate (owning property without a will), the portion of his/her estate so titled passes to
a surviving spouse without a probate. This part seems to be ok at this point. If the estate is not automatically devised to the surviving spouse in this manner or through a joint tenancy and is not held within a trust, it is necessary to “probate the estate”, whether or not the decedent had a valid will. A court having jurisdiction of the decedent’s estate (a probate court) supervises probate, to administer the disposition of the decedent’s property according to the law of the jurisdiction and the decedent’s intent as manifested in his testamentary instrument.

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Why Your Assets May Not Be Protected…..

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As you know, there are over 80 million lawsuits filed every year in the United States. Frivolous lawsuits alone are said to cost the United States over $200 BILLION annually. Even in this current ecomony, things could turn and go back down.  If money gets tighter will more get desperate? How many entrepreneurs abandon their business, which was there vehicle for financial success, and now look to a much easier approach…like suing you and your business. Does someone look at you as their retirement plan? For many Americans, their only option for retirement is to win the lottery or sue someone. I know, not very uplifting, but conceivably reality. This may be the last wake up call to button up your asset protection plan, tax and bookkeeping, and business credit so you and your family are protected. Unfortunately, one entity is not a catch-all for results. Let me ask you these important questions to show where you may be very vulnerable:

1. Do you still operate a side business as a sole proprietorship? That is like playing Russian Roulette with your financial future.

2. Do you own real estate in your own name (separate from your residence)? Even if do not have any equity, to others you must be rich and a target. That is like walking around with a big sign on your forehead that says, “I own real estate in my own name, check it out online…go ahead and sue me.”

3. Are you relying upon your living trust to protect your assets? They do not protect from liability! Do you have family members or parents that are doing the same? That is an open invitation for someone to take their net worth.

4. Do you own safe assets in your own name (like gold and silver)? Is it enough to protect with a separate legal entity from your operating business? Maybe it is a “small” amount in general. The question you have to ask yourself is how would you feel if you woke up tomorrow and your “small” investment was gone? Now…that maybe a different feeling. Losing 100% of your investments no matter how “small” may be a very big deal to you. It is time to protect them before it is too late!

5. Are you operating a business with a partner as a general partnership on the side? That is a double danger because now your partner could cause you to lose all your assets. Are you waiting to make more money first…remember, you cannot buy homeowners insurance when your house is on fire…and you cannot protect yourself (very well) after you have been sued. If you have $100K in assets and are sued for $100K you cannot form an entity and transfer them to protect them (well you can do anything you want but…) the judge will call that fraudulent conveyance and undo your transaction if your goal was to protect your $100K because of the $100K lawsuit. If you had $200K and you did not mind leaving $100K on the table to be taken, that is different…but why be in that position when there is a better way? This is only one threat your business is up against. The other is the IRS (and they are hurting big time when it comes to collecting tax revenues). Are your records up to date? Do you have any records other than an online checking account balance? That is not a business, but a hobby according to the IRS. Finally, is your business financially naked?

How much revenue are you losing on a daily, weekly, or monthly basis? Read the article on how to position your business so you are not financially naked and have an opportunity for success!

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