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Is the Family Business a Part of Your Estate Plan?

Family business contributes to over 70 percent of global productions, but owners of them don't update their estate planning. It's estimated that over 50 percent of family business owners didn't update their estate planning documents for more than five years. Perfect and updated family planning ensures the smooth transition of a property from one generation to other while exploiting many tax benefits as well.

A recent article in Money Times, “Updating estate plans need of the hour for family business owners,” warns that estate planning becomes old or outdated after just a few years. In addition, family situations and relationships between family members, business matters, net worth, and other factors can and will change anytime or over a period of time.

That’s why you need to have an estate plan review on a regular basis. Regardless how complex an estate plan is, it's better to work on a customized estate plan now. This will make certain that your family business passes from one generation to the next without disputes that may further damage its possible growth. In the alternative, estate planning can also be used to offload the family business at a fair price deal.

Many family business owners aren’t aware of charitable planning and charitable gifts. More than 50% of family business owners aren’t exploring these options and their tax benefits.

Because the tax laws change frequently, family business owners need to work with their estate planning attorneys and take advantage of any new strategies to legally avoid estate taxes, gift taxes and other taxes.

After speaking with an attorney, some family business owners find that they're richer than they thought once their estate plan is drawn up. Estate planning is critical for the inheritance to control the assets and minimize the tax imposed by both your state and the federal government.

If you are now motivated to talk with an attorney about  placing your business in the best possible condition when you pass it to the next generation, please set up a consultation before the motivation fades.

Reference: Money Times (September 18, 2015) “Updating estate plans need of the hour for family business owners”

Should A Revocable Trust be Your Estate Planning Choice?

If you haven't considered using a revocable trust rather than a will as your main estate planning document, you could be making a critical mistake.

A recent MoneyWatch article, “5 reasons you need a trust, not a will,” lists five reasons for using a revocable trust as the primary method for disposing your estate.

1. Pass on assets privately, quickly and efficiently. A revocable trust as a vehicle to distribute your estate allows your beneficiaries some privacy. The trust isn't filed with the probate court and isn't a public document (unlike a will). Property transferred into a revocable trust during your lifetime isn't subject to the expense and delays of probate.

2. Preserve assets for heirs and charities. Changes can be made to your revocable trust anytime. However, when you pass away, the trust becomes irrevocable. The provisions that pertain to the disposition of assets to your heirs and charities will be administered by your trustee under the trust’s terms.

3. Assets that remain in your trust after your death typically aren’t considered marital property. Those assets aren't subject to division in a settlement if the beneficiary gets divorced. However, in many states, a divorce court may take the beneficiary's income interest into consideration when determining the division of marital property or support obligations.  (If this is a concern to you, let's talk about FL law.)

4. Retain control over distributions. A trust can contain language that says when distributions of income and principal will be available to beneficiaries, and it can have distributions for specific purposes like education or health care expenses. A trust can also include language for distributions based on attaining specific ages. For example, one-third of the principal is distributed at age 30, half at 35 and the rest at 40.

5. Distribute retirement accounts efficiently. If the trust is the beneficiary of your retirement accounts and if it is written correctly, the trustee can limit withdrawals to the retirement account's minimum required distributions based on the life expectancy of the oldest beneficiary. This avoids the mistake of a beneficiary liquidating a retirement account and triggering a large income tax obligation.

Please make an appointment to discuss if this strategy will work for your specific circumstances.

Reference: MoneyWatch (September 17, 2015) “5 reasons you need a trust, not a will”