A friend, whom we’ll call Charlie, has assets in excess of $150,000, 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 nine months or more. His personal representative won’t even be officially appointed for over a month after filing a Petition for Probate.
Meanwhile, the business decisions anyone makes will be without legal authority. No contracts can be signed. Unless someone has some of Charlie’s money put aside, his bills may not get paid. There goes one business down the drain!
Charlie prevented that sad scenario by using a revocable living trust. The revocable 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 over a quarter-million dollars of estate taxes and probate fees and preserving privacy. In addition, a properly drafted and funded 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. (Note that the business might nevertheless require a professional license, such as that of a real estate broker or contractor, but the Trustee could engage one to serve as the responsible manager.)
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.
The living trust may be a key to your peace of mind, depending 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.
Jerry Kessler practices law in Santa Clarita. You may call him at 661-255-1001.