A friend, who we’ll call Charlie, has assets in excess of $100,000, including his own business, a sole proprietorship. He asks, “If I die, what will happen to my business?”
If his estate is subject to probate, everything will be tied up for eight months to a year. His personal representative won’t even be officially appointed for at least four weeks after filing a Petition for Probate. Meanwhile, the business decisions anyone makes will be without legal authority. No one may be able to sign contracts. Unless someone has some of Charlie’s money put aside, his bills may not get paid. There goes one business down the drain. What can Charlie do to prevent that sad scenario? He can use a revocable living trust.
Nowadays, you can’t open the paper without finding an article or an invitation to a seminar about living trusts, and with good reason: The living trust is the basic building block of estate planning. The living trust may insure that Charlie’s wishes will be carried out, by avoiding probate, possibly saving more than a quarter million dollars of estate taxes and probate fees and preserving privacy. In addition, a living trust can provide for continuity of business management, and promote easy transfer of assets to his beneficiaries by giving Charlie’s Successor Trustee the power to run his business after his death.
What if Charlie were disabled? The living trust can also insure business continuity during his lifetime, by avoiding the necessity of expensive and burdensome conservatorship proceedings.
What if, instead of having a sole proprietorship, Charlie had incorporated his business and was President and sole Director? Here, again, the living trust could facilitate business continuity during Charlie’s disability or after his death. If corporate stock was held in the name of the trustee of Charlie’s living trust, his Successor Trustee could vote the stock, elect himself/herself Director and President, then continue operating the business.
Do you have a sole proprietorship, family business or privately held corporation? What would happen to your business if you were disabled or died suddenly? Would your wishes be carried out?
Is the living trust a key to your peace of mind? That depends on your own particular situation. Your attorney and your tax professional are in the best position to help you decide.
Bear in mind that people’s circumstances and tax laws change. Therefore, whatever estate planning vehicles you select should be reviewed periodically with a knowledgeable professional.
For further information about estate planning, trusts, wills and probate, please call Jerry Kessler at 661-255-1001 for a confidential consultation.