Why Completing Your Estate Planning is a Must!


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.

In order to dispose of certain assets in the estate, it is necessary to sell the liquid assets including real estate. This is where your spouse may be left to sell real estate at a discount and lose significant value. If the decedent died without a will, known as intestacy, the estate will be distributed according to the laws of the state where the decedent resided or held by the court. You never want the state to determine how to distribute your assets. If the decedent died with a will, they will usually name an executor (personal representative), a person tasked with carrying out the instructions laid out in the will. The executor marshals the decedent’s assets. If there is no will, or if
the will does not name an executor, the probate court can appoint one. The other issue with probate is that your assets may be tied up in court for a year or many years longer. Many celebrities’ estates have been tied up for several years with families and lawyers fighting over the assets. That just gives more money to the lawyers and less to the loved ones.

2. Take care of your business. You are working to build your business as an asset and if something happens to you there should be a clear plan on how the business can continue or how to best sell it off. If you have a business partner and one of you dies this can be a real disaster when it comes to paying off the estate of your partner who passed on. Having a buy-sell agreement with a term-life insurance policy on each partner is a must! The ownership of your entity should be held by your living trust for estate planning. Putting your adult kids on
as an owner or officer/manager is not a good idea unless they are really involved in running the business. Why bring undue liability to your business? I would not recommend that. This is a version of shortcuts to avoid good estate planning. If someone in your family or one of your business partner’s wishes to keep the business alive after your death, he or she may face opposition from others who wish to sell the business or who also wish to have a say in running the company. If you know that you can pass the business on to a ready and willing person, say so in an estate plan. Like a guardian plan for your children, an estate plan for your business allows for an easy handoff, so your company can maintain stability.

3. Minimize Estate Taxes. There seems to be some confusion between avoiding estate taxes and income taxes. A Living Trust will NOT help you avoid income taxes. The key is to help lessen your estate taxes. In fact, if you’re the trustee of your Living Trust, you will file your income tax returns in exactly the same way you filed them before the trust existed. There are no new returns to file, and no new liabilities are created. Keep in mind that you may require more complex estate tax planning to help minimize your estate taxes. In 2012, an estate must be worth $5 million to trigger federal estate taxes, so the vast majority of people do not need to worry about this issue. However, several states also have estate taxes, and the exclusion tends to be lower – more like one or two million dollars. If you
are worried about estate taxes because your estate is worth several million dollars, I will share a resource for you at the end of this article

4. Privacy. Most of you would not want your estate to become public record after your death. Having a Living Trust in place is not usually filed in court to become a public record. However, in many cases an inventory must be filed with a court upon death. The inventory will at least show the size of the trust and may be required to list the assets. The inventory is used for the inheritance tax determination. The inventory is public record. The amounts received by each beneficiary may also be public record. One of the goals is to make things as smooth a transition as possible if something happens to you. There are stories upon stories, of family members suing each other after a loved one is gone fighting over the money. This leads to years and many times generational splits in the family because of fighting over an estate which can be all avoided with some proper planning. Why even put your family and your future generations in a position to fall apart because of a lack of planning on your part?

Are you convinced that this is now a must for you and your family? Please take the time to put this in place and you will sleep better at night knowing your family is protected.