It can be stressful and unpleasant to think about dying or becoming severely injured but planning for those possibilities is important, especially for business owners.

Writing a will and estate plan that assigns responsibilities to those you trust to manage your affairs is critical to the ongoing success of your company. Those documents can also help protect your family by clearly separating business and personal assets.

Panelists:

Christopher E. Ratté, attorney, business law and real estate and Amanda K. Steenhuis, attorney, trusts, estates and guardianships, Shaheen & Gordon, P.A., shaheengordon.com Jeff Ventola, product marketing specialist, Service Credit Union, servicecu.org

Christopher E. Ratté, Shaheen & Gordon

What are the basics of a comprehensive estate plan?

For many individuals and families, a comprehensive estate plan will permit the management of health care decisions and property in the event of incapacity and serve to transfer property upon death.

This is often accomplished by documents such as a health care advance directive, a durable power of attorney, a revocable trust, and a pourover will. A health care advance directive appoints an agent to manage health care decisions, and a durable power of attorney appoints an agent to manage finances and legal decisions during one’s lifetime.

A revocable trust is a legal entity that can hold the title of assets during one’s lifetime and provide for the management and distribution of those assets after death. A pourover will directs probate assets (assets in an individual’s name that don’t pass through joint ownership or beneficiary designation) to a revocable trust.

Why is estate planning crucial for business owners, and what are the key elements to consider in crafting a comprehensive plan?

Proper estate planning is crucial for small business owners to protect both the owner’s family and the business itself.

All too often, a business owner will have a corporate attorney to handle business affairs and a different estate planning attorney to handle their personal affairs. This can often result in two distinct and competing plans. The business owner must have one comprehensive plan that incorporates both personal and business matters in the event of the owner’s death or disability.

Such a plan may include a combination of various elements, including business buy-sell agreements, life and disability insurance, and different types of revocable and irrevocable trusts. Lastly, depending on the value of the business and the size of the overall estate, a wellthought-out and comprehensive estate plan can help avoid or minimize federal estate taxes.

How can business owners address the complex issue of business succession within the context of estate planning, ensuring a seamless transition of assets and leadership?

Succession planning is vitally important for all small businesses. Many business owners spend most of their time and effort planning how to build the business, but they never take the time to consider what would happen to the business if they unexpectedly die or become incapacitated.

A good succession plan should lay out exactly who will take over the ownership and management of the business in that event and include mechanisms to make it happen.

The plan may include elements such as a business buysell agreement with other partners or a key employee, which may be funded by life insurance, as a way to transition business ownership while retaining the cash value for the benefit of the owner’s family.

Often, careful planning will include moving one’s interest in a business into a revocable trust for probate avoidance purposes. Without this careful planning, the transition of business ownership interests after death may be subject to court oversight, which could entail lengthy delays, additional costs, public disclosure of assets and a costly business valuation.

The succession plan should be designed to work in conjunction with the business owner’s personal estate plan to ensure a seamless transition of both business and personal assets.

Jeff Ventola, Service Credit Union

Why is estate planning crucial for both businesses and individuals, and what are the key elements to consider in crafting a comprehensive plan?

Estate planning is essential for businesses and individuals because it ensures that assets are distributed according to one’s wishes, while also minimizing tax liabilities and legal complications. For businesses, it secures the continuity of operations and smooth leadership transitions, which is crucial for long-term stability.

What is the difference between an estate plan and a succession plan?

Businesses usually have succession plans as opposed to estate plans. This is useful in guiding the selection of individuals who will fill key roles in the business once the owner has passed on.

For closely held family businesses, it is important for the owner(s) of the business to have an estate plan. That way, when the sole owner, or partner, of a business dies, it will be clear how the ownership structure of that business will change.

What legal structures and instruments are essential for effective estate planning, and how do they work together?

The key elements of a comprehensive estate plan include a well-drafted will, trusts to manage and protect assets, a power of attorney for financial decisions, and advanced health care directives.

A will is a legal document that directs who will receive your assets and property at the time of your death. The executor of your will manages the assets and the process of disposing of those assets with the goal of successfully moving through the probate process.

A trust is a legal arrangement where a “trustee” (someone you select) manages assets held in the trust (a separate legal entity) you’ve created. You select which of your assets will be transferred to the trust and who will benefit from the income created by those assets.

Your assets will remain in the trust for a period of time, and sometimes indefinitely. The trustee will manage the affairs of the trust throughout its lifetime, and income created by assets held in the trust will be distributed to the beneficiaries you have selected.

A power of attorney (POA) is a legal document that grants one person, known as the agent or attorney-in-fact, the authority to act on behalf of another person, known as the principal.

The agent can make decisions regarding the principal’s financial affairs, health care or other personal matters, depending on the scope defined in the POA document. A health care power of attorney specifically authorizes the agent to make medical decisions for the principal if they are unable to do so.

Would the executor of my estate be able to sell my business?

In general, the executor of an estate has complete authority to act in place of the deceased person. Of course, if after the owner’s death ownership of the business is transferred to others by virtue of pre-existing agreements, then those new owners would have authority over all aspects of the business.

What questions should I ask when it comes to planning for the future of my business?

Evaluating the impact and consequences of our passing on those we leave behind is a daunting task.

Try asking yourself: What is the legacy I’d like to leave behind? Do I want the business to remain in operation and the management and ownership of the company to pass to specific individuals? Am I interested in having my assets liquidated and leaving that cash to grandchildren for their education, for example?

Once you think you know what you’d like to do, consult trusted legal and accounting professionals. With a little planning, almost anything you want to happen, can happen. Having a clear vision and providing the legal structure to allow that vision to be realized after you’re gone is essential to the success of your plan.