Estate planning for small business owners can be a bit challenging because there are so many considerations. There are different approaches that can be taken depending on the circumstances, but there are some core necessities that will apply to everyone.
Inheritance Planning
The first step is to make sure that your loved ones receive their inheritances in a timely and efficient manner. A will is certainly a possibility, but in many instances, a living trust is a better choice.
When you convey assets into a living trust, you act as the trustee while you are alive and well, so you maintain control of the assets. You name a successor in the trust declaration to assume the role after your passing, and your heirs would be the beneficiaries.
After you are gone, assets will be distributed to the beneficiaries in accordance with the wishes that you recorded in the trust declaration. These distributions would not be subject to probate, which is a costly and time-consuming legal process.
A living trust is the optimal choice for a wide range of people, but there are other types of trusts that can satisfy specific objectives. When you choose our firm, we can gain an understanding of your situation and provide recommendations so you can make informed decisions.
Incapacity Planning
Your plan should include an incapacity component, because a significant percentage of seniors become unable to handle their own affairs eventually. A living will can be used to state your life support preferences, and you can name a medical decision-maker in a durable power of attorney.
When you have a living trust, you can name a disability trustee to assume the role in the event of your incapacity. A durable power of attorney for property can be executed to empower an agent to manage property that is not held by a trust.
Inheritance Balancing and Buy-Sell Agreements
If you are running a family business with one of your children and you are going to leave the business to that child, inheritance balancing will be necessary. We can help you actualize your legacy goals if you are in this situation.
Small business partners have to implement some type of exit strategy that works for everyone that is involved, and a buy-sell agreement can provide the ideal solution.
With the agreement called the cross-purchase plan, the partners agree upon the value of a business share. They take out life insurance policies on one another with payouts that are equal to the value of a share in the business.
When a partner passes away, the proceeds are collected by the other partners, and they are used to purchase the deceased partner’s share from their estate.
A buy-sell agreement can also be used to facilitate exits for retirement or for any other reason, and life insurance does not necessarily have to be the source of the funding.
Asset Protection
We live in a litigious society, so you have to be concerned about legal actions if you are a small business owner. Your own personal property would be in play if you have a sole proprietorship, so you should use an asset protection structure to keep your resources out of harm’s way.
The limited liability (LLC) company is a very commonly used asset protection structure for small businesses. If you establish an LLC, generally speaking, your personal assets would be protected from creditor claims and other legal actions that are taken against the business.
On the other side of the coin, if you are the target of a lawsuit, the limited liability company would be protected in most instances.
Another asset protection structure is the family limited partnership (FLP). As the name would indicate, members of the partnership must be in the same family, and the general partner that establishes the partnership would have sole decision-making authority.
In a manner that is similar to the limited liability company, if a family limited partnership is sued, the partners’ personal property would be protected. Once again, the property is held by the partnership would be protected if any partner is personally sued.
Schedule a Consultation Today!
We are here to help if you are ready to work with a Memphis, Tennessee estate planning attorney to put a plan in place. There are Mendelson Law Firm attorneys that are licensed in Mississippi and Arkansas along with the great state of Tennessee, so we have a wide reach.
You can schedule a consultation appointment right now if you give us a call at 901-763-2500 or 866-997-6325 or fax us at (901) 763-2525. There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.
