Tuesday, August 4, 2009

As A Business Owner, What Do I Need To Consider When Planning My Estate?

Many business owners have a well thought out business plan as it relates to operating their business, but neglect to plan for contingencies such as death or loss of competence.

When an individual owns a business, estate planning requires a more sophisticated look at the entire picture. The initial focus is on the underlying documents of ownership (do they accurately reflect the ownership interest) and the form in which the business is held (corporation, LLC, partnership, etc.). For example, two of the issues we analyze -- among many others -- are:

■ Is the business held in the best possible way to reduce the imposition of estate taxes?

■ Should minority ownership interests be gifted to family members during the business owner’s lifetime in an effort to reduce the estate tax bite upon death? Such lifetime gifts can reduce the value of the business for estate tax purposes by up to 35 percent.

There are a vast array of issues that are factually specific to your situation and your needs. One size plan will not fit all. For example, many couples have premarital and post-marital agreements, which require specific distributions upon death. As estate and trust attorneys, we ensure that the terms of your Trust effectively reflects the terms of these contractual agreements.

On the other hand, if you are one of the very few that have a contingency plan, ask yourself the following questions:

■ Has it been updated since the Tax Reform Act of 2001?

■ Have you taken advantage of new estate planning vehicles that may
significantly reduce estate taxes for your family?

■ Has your family situation changed? Have you remarried or divorced or had more children?

■ More importantly, was your existing plan properly drafted?

Just as we have health checks, our estate plans should be revisited periodically.

For a detailed article on "Estate Planning For The Business Owner," go to the following link from our website:

Even though none of us like to think about the fact that we will not live forever and that when we die the taxman will always be standing at the head of the line -- this is a fact of life. In addition, family disputes and probate litigation arise more often when estates are not well-planned.

If you want to ensure that your family is properly cared for and that all the facets of your business, its succession and its impact on your estate plan are well-planned, you should address these issues sooner rather than later. It is common to put these type of projects off and we are skilled at helping our business owner clients begin and go through the estate planning process whether there is a small family business or there are numerous corporations, real estate holdings and limited partnerships involved.

Any questions or comments should be directed to: hm@moravecslaw.com or (626) 793-3210. The firm website is http://www.moravecslaw.com/

Henry (Hank) Moravec is a partner at Moravecs, A Professional Law Corporation, in San Marino, California. He focuses his practice on Estate Planning, Trust and Probate Administration, Probate Litigation, Beneficiary and Trustee Representation, Tax Law, and Nonprofit Law. He represents clients throughout Southern California and his office is conveniently located for clients in the Los Angeles, Orange and San Bernardino Counties.