Will And Trust Indy

Anne Heche Dies With Conflict Around Her Will, Leaving Her Sons & Estate in Legal Limbo-Part 1

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ANNE HECHE DIES WITH CONFLICT AROUND HER WILL, LEAVING HER SONS & ESTATE IN LEGAL LIMBO—PART 1

Actress Anne Heche died this August following a tragic car accident in which she plowed her vehicle into a West Los Angeles home, where it burst into flames. After being pulled from the wreckage, the Emmy Award-winning actress was hospitalized in critical condition, suffering from severe burns and smoke inhalation.

The fiery accident left Heche brain-dead and comatose. However she was kept on life support for seven days in order to identify a suitable recipient for her organs, according to a statement from her publicist, which was in line with the actress’ wishes . After a successful match with organ donors, Heche was removed from life support on August 14th and died shortly thereafter. She was 53 years old. https://pagesix.com/2022/08/12/anne-heche-not-expected-to-survive-car-crash/?_ga=2.199837805.272709222.1663801684-802000813.1662580652

Heche is survived by two young sons. Her eldest, Homer Heche Laffoon, is 20 years old. He is from her marriage with ex-husband Coleman Laffoon. Her youngest son, Atlas Heche Tupper, is 13. His father is Canadian actor James Tupper, with whom Heche had a 10-year relationship following her divorce from Laffoon. Heche is also survived by her mother, Nancy Heche.

According to a court petition filed by her eldest son Homer on August 31st, Heche died without a will, and Homer requested that he be named executor of his late mother’s estate. However, on September 15th, Heche’s ex-boyfriend James Tupper filed a probate petition objecting to Homer’s bid. He claimed that Heche e-mailed him a copy of her will in 2011, leaving him (Tupper) in charge of her estate.  https://pagesix.com/2022/09/01/anne-heche-died-without-will-son-homer-seeks-control-of-estate/

In a report by Rolling Stone, Tupper says Heche nominated him to handle her affairs, allegedly stating in her e-mail, “My wishes are that all of my assets go to the control of Mr. James Tupper to be used to raise my children and then given to the children.” https://www.rollingstone.com/tv-movies/tv-movie-news/anne-heche-estate-war-1234594195/

Tupper requested that the court honor Heche’s final wishes and deny Homer’s petition, which he alleges incorrectly claimed she died intestate. Intestate is the legal term for when someone dies without a will. In Tupper’s petition, he questioned both Homer’s ability to carry out the executor role and his motives, noting that “Homer is only 20 years of age and is unemployed, and was estranged from [Heche] at the time of her death.”

While we can’t know for certain whether or not Anne Heche had a will or if the will Tupper describes is valid, given that there is so much confusion surrounding her will, the late actress most likely didn’t have any trusts set up either. Her failure to plan is likely to create a number of major problems for her two sons and other surviving loved ones.

With this in mind, in this series of articles we’ll discuss Heche’s estate planning mistakes and how those errors will likely impact her family and assets. From there, we’ll outline what you can learn from this tragic situation and the steps you can take to make certain that your loved ones never need to endure a similar situation.

 

PROBATE: A NEEDLESS ORDEAL & EXPENSE

If you die without a will, or with uncertainty around your will, as Heche did—and even if your estate plan includes a will alone—you are guaranteeing your family will have to deal with the court process of probate upon your death or incapacity. Like all court proceedings, probate can be long, costly, and traumatic for your surviving loved ones.

Until Heche’s estate completes the probate process, her assets will be mostly inaccessible to her heirs. As a result, her sons, Homer and Atlas, could be left without any financial support from their late mother for quite a significant amount of time.

It will likely take many months just to locate all of Heche’s assets, and it’s likely some of those assets will get overlooked—and some may never be found. All told, there is approximately $58 billion in unclaimed property across the United States, and this is exactly how a great deal of it ends up lost.

To ensure all of her assets are located and accounted for, Heche could have had a relationship with a lawyer who, ideally, would have created (and maintained) an inventory of her assets. Such an inventory not only makes creating your estate plan much easier, but most importantly, it allows your loved ones to know what you have, where it is, and how to access it if something happens to you.

As your estate planning lawyer, we will not only help you create a comprehensive asset inventory, we’ll make sure it stays regularly updated throughout your lifetime.

 

A LONG, EXPENSIVE, & PUBLIC PROCESS

What we know so far is that Heche didn’t seem to have a lawyer who created an inventory of her assets, or to make sure her surviving family would stay out of court, or even out of conflict. As a result, her estate is likely to be stuck in probate for at least a year or more. Even then, that assumes everything goes smoothly and there are no serious conflicts or disputes among Heche’s potential heirs or creditors, which is common following a celebrity’s death—and as we are already seeing between Homer and Tupper.

In fact, with his surviving heirs and creditors fighting over the rights to his vast fortune, it took more than six years for Prince’s estate to be settled. https://www.rollingstone.com/music/music-news/prince-estate-value-1285413/

The unnecessarily lengthy time frame is just one of the drawbacks to probate—the unnecessary expense of a probate case is a whole other issue. Before Homer and Atlas can inherit a dime, a veritable army of other people and entities—attorneys, a personal representative, accountants, various advisors, creditors, and possibly, the IRS—must all be paid, and this is likely to seriously deplete Heche’s estate.

Probate costs in California average 5% of the total value of the estate, leaving an estimated cost to her family of approximately $200,000 or more. Most of these fees could have been avoided with a properly established estate plan—and with a lawyer to guide her and her family throughout her life and beyond.

Last, and perhaps worst, probate is open to the public, so all of Heche’s dirty laundry will be fodder for the tabloids, as it already has been for so much of her life. Given the actress’ past history with mental illness and her contentious relationships with her mother, ex-husband, and Ellen DeGeneres, the tabloids are likely to dig up plenty of dirt.

Fortunately, there’s a simple solution to ensuring your surviving loved ones will avoid the cost, time delay, and public nature of probate upon your eventual death or potential incapacity, and this solution is available not only to rich celebrities, but to regular folks, as well.

With a well-counseled and drafted estate plan, likely including a living trust in addition to a will (and a trusted advisor to support it all), Homer and Atlas would have been able to access their late mother’s assets without the need for any court intervention whatsoever, if that’s what Heche would have wanted.

Alternatively, Heche could have made it clear that she wanted Tupper controlling her affairs, and her lawyer could have confirmed that without dispute. Finally, as long as a trust is properly created and maintained, it will remain private, and the transfer of assets to your heirs can happen within the privacy of our office, not a courtroom, and on your family’s time.

This would have prevented the tabloids and other potential bad actors from getting access to the details of Heche’s assets, her beneficiaries, and family conflicts, all of which will now be readily available for public consumption.

Don’t let your loved ones be left with a mess like Anne Heche’s family is dealing with now. Using our Life & Legacy Planning process, we’ll work with you to put in place the right combination of estate planning solutions to fit with your asset profile, family dynamics, budget, as well as your overall goals and desires.

Next week, in part two of this series, we’ll discuss the type of trust Heche could have used to pass on her assets to her two young sons.

PLANNING FOR INCAPACITY & END-OF-LIFE CARE

Heche’s untimely death is a vivid reminder that estate planning isn’t just about planning for the distribution of one’s assets after death, but also planning for incapacity and end-of-life care. With this in mind, in part two, we’ll also address the estate planning tools the late actress should have had in place to deal with the time period following her terrible accident when she was in a coma.

Until then, if you need to create your estate plan, or you need to review an existing plan, reach out to us to schedule your visit. With our guidance and support, we can help keep your family out of court and conflict, and ensure your loved ones won’t have to endure the same tragic consequences as Heche’s.

 

Probate: What Is It, and How Do I Avoid It?-Part 2

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What Probate Is, and Why You Want to Avoid It 

Read Part 1 

Unless you’ve created an estate plan that works to keep your family out of court, when you die (or become incapacitated), many of your assets must go through probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public. Because of this, avoiding probate—and keeping your family out of court—is often a central goal of estate planning.

Two weeks ago in part one of this series, we explained how the probate process works and what it would entail for your loved ones. Here in part two, we’ll discuss the major drawbacks of probate for your family, and outline the different ways you can help them avoid probate with wise planning.

 

What’s At Stake For My Family?


Probate court proceedings can take months, and sometimes even years, to complete. In the immediate aftermath of your death, that’s the last thing you want your loved ones to have to endure. In addition, the cost of their time and emotional strain are just the start of the potentially devastating consequences your family could face if you don’t plan ahead.

Without easy and immediate access to your assets, your family could face serious financial hardship at a time when they need the most support. Not only that, but to help them navigate the legal proceedings, your loved ones will almost certainly need to hire a lawyer, which can result in hefty attorney’s fees and the real risk of them hiring a lawyer who is uncommunicative, which only creates more stress for them. On top of all of that, they also need to consider the court costs, executor’s compensation, and all of the various other administrative expenses related to probate. By the time all of those costs have been paid, your estate could be totally wiped out, or at the very least, seriously depleted.

Another drawback of probate is the fact that it’s a public process. Whether you have a will or not, all of the proceedings that take place during probate become part of the public record. This means that anyone who’s interested can learn about the contents of your estate, who your beneficiaries are, and what they will inherit, which can set them up as potential targets for scammers and frauds.

Probate also has the potential to create conflict among your loved ones. This is particularly true if you have disinherited someone or plan to leave significantly more money to one relative than the others, in which case, a family member may contest your will. And even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure.

 

How Can I Avoid Probate?

Before we discuss the more advanced ways you can use estate planning to allow your loved ones to avoid probate, it’s important to point out that not all of your assets will have to go through the probate process—and that’s true even if you don’t have any estate plan at all.

Assets That Do Not Require Probate:

Certain assets, such as those with beneficiary designations like 401(k)s, IRAs, and the proceeds from life insurance policies, will pass directly to the individuals or organizations you designated as your beneficiary, without the need for any additional planning.

The following are some of the most common assets that use beneficiary designations and therefore, bypass probate:

  • Retirement accounts, IRAs, 401(k)s, and pensions
  • Life insurance or annuity proceeds
  • Payable-on-death (POD) bank accounts
  • Transfer-on-death (TOD) property, such as bonds, stocks, vehicles, and real estate

Outside of assets with beneficiary designations, other assets that do not go through probate include assets with a right of survivorship, such as property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship. These assets automatically pass to the surviving co-owner(s) when you die, without the need for probate.

However, it’s critical to note here that if you name your “estate” as the beneficiary of any of these assets, those assets will go through probate before being distributed. The same goes if you overlook a beneficiary designation, or if you die at the same time as a joint property owner—each of those assets will also go through probate, even though they have beneficiary designations.

In addition, we generally recommend that you do not rely on beneficiary designations to handle the distribution of your assets. These designations give you little to no control over how your assets are distributed, and they can result in negative outcomes you did not intend, especially if you have a blended family with children from a prior marriage or if you have no children at all.

Although there are several different types of assets that automatically bypass probate, the majority of your assets will require slightly more advanced levels of planning to ensure your loved ones can immediately access them, without the need for any court proceedings in the event something happens to you. The primary estate planning tool for this purpose are trusts.

 

Avoiding Probate With A Revocable Living Trust

Trusts are a popular estate planning tool for avoiding probate. Although there are a variety of different types of trust, the most commonly used trust for probate avoidance is a revocable living trust, also called a “living trust.”

A trust is basically a legal agreement between the “grantor” (the person who puts assets into the trust) and the “trustee” (the person who agrees to manage those assets) to hold title to assets for the benefit of the “beneficiary.” With a revocable living trust, this agreement is typically made between you as the grantor and you as the trustee for the benefit of you as the beneficiary. You act as your own trustee during your lifetime, and then you name someone as a “successor trustee” to take over management of the trust when you die or in the event of your incapacity.

It might seem odd to make an agreement with yourself to hold title to assets for yourself in order to benefit yourself. Yet by doing so, you remove those assets from the court’s jurisdiction in the event of your incapacity or when you die. Instead, those assets transfer to your successor trustee, without any court intervention required.

At that point, your successor trustee is responsible for managing the trust assets and eventually distributing them to your beneficiaries, according to the terms you spell out in the trust agreement. This is how a trust avoids probate, saving your family significant time, money, and headaches.

The Key Benefits Of A Living Trust

Unlike a will, if your trust is properly set up and maintained, your loved ones won’t have to go to court to inherit your assets. Instead, your successor trustee can immediately transfer the assets held by the trust to your loved ones upon your death or in the event of your incapacity. Since you can include specific instructions in a trust’s terms for how and when the assets held by the trust are distributed to a beneficiary, a trust can offer greater control over how your assets are distributed compared to a will.

For example, you could stipulate that the assets can only be distributed upon certain life events, such as the completion of college or marriage, or when the beneficiary reaches a certain age. In this way, you can help prevent your beneficiaries from blowing through their inheritance and offer incentives for them to demonstrate responsible behavior. Even better, as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce—which is something else wills don’t provide.

Finally, trusts remain private and are not part of the public record. So, with a properly funded trust, the entire process of transferring ownership of your assets can happen in the privacy of us, your estate planning lawyer’s office, not a courtroom, and on your family’s time.

 

Transferring Assets Into A Living Trust

For a trust to function properly, it’s not enough to simply list the assets you want the trust to cover. When you create your trust, you must also transfer the legal title of any assets you want to be held by the trust from your name into the name of the trust. Retitling assets in this way is known as “funding” a trust.

Funding your trust properly is extremely important, because if any assets are not properly funded to the trust, the trust won’t work, and your family will have to go to court in order to take ownership of that property, even if you have a trust. In light of this, it’s critical to work with your estate planning lawyer to ensure your trust works as intended.

While many lawyers will create a trust for you, few will ensure your assets are properly inventoried and funded into your trust, and then ensure the inventory of your assets is kept up-to-date as your life and assets change over time. As your estate planning lawyer, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This will keep your assets from being lost, as well as prevent your family from being inadvertently forced into court because your plan was never fully completed.

 

Living Trusts, Taxes, Creditors, & Lawsuits

When you create a revocable living trust, you are free to change the trust’s terms or even completely terminate the trust at any point during your lifetime. Because you retain control over the assets held by a living trust during your lifetime, those assets are still considered part of your estate for estate tax purposes. Similarly, assets held in a living trust are not protected from your creditors or lawsuits during your lifetime. This is an important and often misunderstood point.

Again, a revocable living trust does not protect your assets from creditors or lawsuits, and it has no impact on your income taxes. However, as mentioned earlier, as long as the assets are held by a living trust or a Lifetime Asset Protection Trust, those assets can be protected from your beneficiaries’ creditors, lawsuits, and even divorce settlements. Be sure to ask us about the different trust-based estate planning options we offer to find one that’s best suited for your particular situation.

The primary benefit of a living trust is to pass your assets to your loved ones without any need for court or government intervention, and to ensure your assets pass in the way you want to the people you want.

 

Life & Legacy Planning: Do Right By Those You Love Most


Although a living trust can be an ideal way to pass your wealth and assets to your loved ones, each family’s circumstances are different. This is why we will not create any documents until we know what you actually need and what will be the most affordable solution for you and your family—both now and in the future—based on your family dynamics, assets, and desires.

The best way for you to determine which estate planning strategies are best suited for your situation is to meet with us  for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this process, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.

Sitting down with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. As your estate planning lawyer firm, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started.

Probate: What Is It, and How Do I Avoid It?-Part 1

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A Brief Explanation of What Probate Is and Why You Want To Avoid It

Unless you’ve created a proper estate plan, when you die, many of your assets must first pass through the court process known as probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public. Because of this, avoiding probate—and keeping your family out of court—is a central goal of most estate plans.

During probate, the court supervises a number of different legal actions. All of them are aimed at finalizing your affairs and settling your estate. Although we’ll discuss them more in-depth below, probate typically consists of the following processes:

  • Determining the validity of your will (if you have one).
  • Appointing an executor or administrator to manage the probate process and settle your estate.
  • Locating and valuing all of your assets.
  • Notifying & paying your creditors.
  • Filing & paying your taxes.
  • Distributing your assets to the appropriate beneficiaries.

In most cases, going through all of these steps is a real pain for the people you love. It’s expensive, can take a long time, and tends to be highly inconvenient, and sometimes even downright messy.

By implementing the right estate planning strategies, however, you can help your loved ones avoid probate all together—or at least make the process extremely simple for them. To spare your family from the time, cost, and stress inherent to probate, here in this two-part series, we’ll first explain how the probate process works and what it would entail for your loved ones. Then we’ll outline the different ways you can avoid probate with wise planning.

 

When Is Probate Required?

As mentioned previously, if you fail to put in place a proper estate plan, your assets must go through probate before they can be distributed to your heirs. In general, this includes those individuals who have no estate plan at all, those whose estate plan consists of a will alone, and those who have a will that’s deemed invalid by the court.

It’s important to point out that even if you have a will in place, your loved ones will still be required to go through probate upon your death. Therefore, if you want to keep your family out of court and out of conflict when you die, you cannot rely solely on a will, and you’ll need to put additional estate planning vehicles in place. We’ll cover this in further detail later.

If you die without a will, it’s known as dying intestate, and in such cases, probate is still required to pay your debts and distribute your assets. However, since you haven’t expressed how you wish your estate to be divided among your heirs, your assets will be distributed to your closest living relatives based on our state’s intestate succession laws. These laws typically give priority to spouses, children, and parents, followed by siblings and grandparents, and then more distant relatives. If no living heirs can be found, then your assets go to the state.

Some states allow estates with a relatively low value to bypass probate and use an abbreviated process to settle the estate. For example, Texas law allows estates with a total value of less than $75,000 to skip probate. In those cases, beneficiaries can claim the estate’s assets using simpler legal actions, such as by filing an affidavit or other form.

Additionally, when an individual’s debts exceed the value of their assets, or a person has no assets at all, probate is often not initiated, and the estate is settled using alternative legal processes.

 

How Does Probate Work?

How probate plays out is largely determined by whether or not you had a valid will in place at the time of death. However, even in cases where no will exists, or the will is deemed invalid, the probate process is quite similar. Indeed, once the court appoints someone to oversee the probate process on your behalf, the process unfolds in a nearly identical manner, regardless of whether you had a will or not.

 

1. Authenticating The Validity Of Your Will:

Following your death, your executor is responsible for filing your will and death certificate with the court, and this initiates the probate process. From there, the court must authenticate your will to ensure it was properly created and executed in accordance with state law, and this may involve a court hearing.

Notice of the hearing must be given to all of the beneficiaries named in your will, along with all potential heirs who would stand to inherit under state law in the absence of a will. This hearing gives these individuals the opportunity to contest the validity of your will in order to prevent the document from being admitted to probate.

For example, someone might contest your will on the grounds that it was improperly executed (signed, witnessed, and/or notarized) as required by state law, or someone might claim that you were unduly influenced or coerced to change your will. If such a contest is successful, the court declares your will invalid, which effectively means the document never existed in the first place.

 

2. Appointing The Executor Or Administrator:

If you created a will, the court must formally appoint the person you named in your will as your executor before they can legally act on your behalf. If you died without a will, the court will appoint someone—typically your closest living relative—to serve in this role, known as your personal representative or administrator.

In some cases, the court might require your executor to post a bond before they can serve. The bond functions as an insurance policy to reimburse the estate in the event the executor makes a serious error during probate that financially damages the estate.

 

3. Locating & Valuing Your Assets:

Once probate begins, the executor must identify, locate, and take possession of all of your assets so they can be appraised to determine the total value of your estate. This includes not only those assets listed in your will and other estate planning documents, but also those you may have not included in your estate plan. This is why keeping a regularly updated inventory of your assets is so important.

Any assets the executor is unable to locate will end up in our state’s Department of Unclaimed Property. Across the U.S., there is more than $58 billion (yes, that’s billion with a ‘b’) of assets stuck in state Departments of Unclaimed Property.  Fortunately, this is easy to prevent when you work with us. As your estate planning lawyer, we will not only help you create a comprehensive asset inventory. We will make sure this inventory stays updated throughout your lifetime.

In the case of real estate, although the executor is not expected to actually move into your home or other residence, he or she is required to ensure that your mortgage, homeowners insurance, and property taxes are paid while probate is ongoing. These and all other debts can be paid from your estate.

Once all of your assets have been located, the executor must determine their value, which is typically done using financial statements and/or appraisals. From there, the combined value of all of your assets is used to estimate the total value of your estate.

 

4. Notifying & Paying Your Creditors:

To ensure all of your outstanding debts are paid before your assets are distributed, the executor must notify all of your creditors of your death. In most states, any unknown creditors can be notified by publishing a death notice with your local newspaper.

Creditors typically have a limited period of time—usually one year—after being notified to make claims against your estate. The executor can challenge any creditor claims he or she considers invalid, and in turn, the creditor can petition the court to rule on whether the claim must be paid.

From there, valid creditor claims are then paid. The executor will use your estate funds to pay all of your final bills, including any outstanding medical and funeral expenses.

 

5. Filing & Paying Your Taxes:

In addition to paying all of your outstanding private debts, the executor is also responsible for filing and paying any outstanding taxes you owe to the government at the time of death. This includes personal income and capital-gains taxes, as well as state and federal estate taxes, if your estate is valuable enough to qualify.

That said, the federal estate tax exemption is currently set at $11.7 million for individuals and $23.4 million for married couples, so most families won’t have to worry about estate taxes. And for those who do exceed that threshold, there are several strategies you can use to reduce the size of your estate to avoid these taxes.

Any taxes due are paid from estate funds. In some cases, this may require liquidating assets to raise the needed cash. As your Personal Family Lawyer®, we will not only support you during your lifetime to implement tax-saving strategies to minimize your tax bill, but we will also work with your loved ones following your death in the same capacity to ensure the wealth and legacy you’ve built provides the maximum benefit to those you leave behind.

 

6. Distribution Of Your Remaining Assets:

Once the court confirms all of your debts and taxes have been paid—which typically requires the executor to file an accounting of all transactions he or she engaged in during the probate process—the executor can petition the court for authorization to distribute the remaining assets in your estate to the beneficiaries named in your will, or according to state intestate succession laws, if you didn’t have a will.

When all assets have been distributed, the executor must file a petition with the court to close probate. If all creditors and taxes have been paid, your assets have been distributed, and there are no other outstanding issues to be addressed, the court will issue an order formally closing the estate and terminating the executor’s appointment.

 

Keep Your Family Out Of Court & Out Of Conflict

As your estate planning firm, one of our primary goals when creating your estate plan is to keep your family out of court and out of conflict no matter what happens to you. Yet, as you can see, if your family has to go through probate, your estate plan falls woefully short of that goal, leaving those you love most stuck in an unnecessary, expensive, time-consuming, and public court process.

Fortunately, it’s easy for you to spare your family the burden of probate with proactive planning. Next week, we’ll look at the ways you can do just that in the second part of this series. Until then, if you haven’t put an estate plan in place or have one that would force your family to go through probate, work with us, your estate planning lawyer, and schedule a Family Wealth Planning Session.

 

Next week, in part two, we’ll discuss the estate planning strategies that you can use to avoid the need for your loved ones to go through probate.

4 Reasons Estate Planning Is Essential For Business Owners

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Or: Why Should Business Owners Have An Estate Plan?

If you’re running a business, it’s easy to give estate planning less priority than your other business matters. After all, if you’re facing challenges meeting next month’s payroll or your goals for growth over the coming quarter, concerns over your potential incapacity or death seem far less urgent.

The reality is that considering what would happen to your business in the event of your incapacity or when you die is one of your most pressing responsibilities as a business owner. Although estate planning and business planning may seem like two separate tasks, they’re actually inexorably linked. Given that your business is likely your family’s most valuable asset, estate planning is crucial not only for your company’s continued success, but also for your loved ones’ future well being.

Without a proper estate plan, your team, clients, and family could face dire consequences if something should happen to you. Fortunately, these dangers can be mitigated fairly easily if you use a few basic estate planning strategies. To demonstrate why proper estate planning is so important for business owners, here are four issues your company and family are likely to encounter as a result of poor estate planning. We also give you some ideas about the corresponding estate planning solutions you can use to prevent and/or mitigate those issues.

Issue #1: If your estate plan consists of only a will, your estate—including your business and its assets—must go through probate when you die.

When it comes to creating an estate plan, most people typically think of a will. While it’s possible to leave your business to someone in your will, it’s far from the ideal option. That’s because upon your death, all assets passed through a will must first go through the court process known as probate.

During probate, the court oversees your will’s administration to ensure your assets (including your business) are distributed according to your wishes. But probate can take months, or even years, to complete, and it can also be quite expensive. This situation can seriously disrupt your operation and its cash flow. What’s more, probate is a public process, potentially leaving your business affairs open to your competitors.

Plus, while your family and team may know how to run your company without you, they might be unable to access vital assets, such as financial accounts, until probate is concluded. Moreover, even if they can access all of the needed assets, the legal fees charged by the lawyers your family will likely have to hire to help them navigate probate can quickly deplete your company’s coffers.

This is all assuming your will isn’t disputed during probate, which is also a real possibility, especially with a highly profitable business at stake. If your heirs disagree about whom you name to control your business and/or how the business assets should be divided, a vicious court battle could ensue and drag on for years, dividing your family and crippling your company.

 

Estate Planning Solution: Given the drawbacks associated with a will, a better way to ensure your business’s continued success following your death is by placing your company in a trust: either a revocable living trust, an irrevocable trust, or some combination of the two. A trust is not required to go through probate, and all assets placed within the trust are immediately transferred to the person, or persons, of your choice in the event of your death or incapacit

When you die, having your business held in trust would allow for the smooth transition of control of your company, without the time and expense associated with probate. Plus, trusts are not open to the public, so your company’s internal affairs would remain private, and the transfer of ownership can take place in your lawyer’s office, not a courtroom. Finally, trusts, especially irrevocable trusts, can help shield your business and its assets from creditors and lawsuits, which could threaten your company with you out of the picture.

 


Issue #2: If you become incapacitated by illness or injury and you haven’t legally named someone to manage your business assets, the court will choose someone for you.

Another issue with relying solely on a will is that a will only goes into effect when you die and offers no protection for your business if you’re incapacitated by accident or illness. With just a will—or no estate plan at all—the court will appoint a financial guardian or conservator to assume control of your business until you recover

Like probate, the court process associated with guardianship can be long and costly. Whether the guardian is a family member, employee, or outside professional, it’s doubtful that individual would run your business exactly how you would want them to, and this can seriously disrupt your operation. Not to mention, having a court-appointed guardian managing your business affairs can lead to serious conflicts and strife within both your team and family, particularly if you’re out for a lengthy period.

 

Estate Planning Solution: One estate planning vehicle that can prevent this is a durable financial power of attorney. A durable financial power of attorney allows you to name the person you would want to run your business and handle all of your other financial affairs if you ever become unable to do so yourself. If you’re sidelined by illness or injury, this person will be granted legal authority to handle your business affairs, such as managing payroll, signing documents, and making financial decisions.

This not only speeds the expense and delay associated with the guardianship process, but it also ensures that while you are incapacitated, your company and other financial interests will be managed by someone you trust, rather than relying on the court to choose someone for you.

Again, most ideally, having a trust and a named Trustee, would allow your business to be operated in the event of your incapacity, without the necessity for any court process at all.

 

Issue #3: If your business partner dies and you don’t have a legal agreement that allows you to purchase your partner’s share of ownership in your company, along with a source of liquidity to fund that purchase, you could find yourself in business with your partner’s heirs. 

If you share ownership of your business with one or more other people, it’s crucial that you have a legally binding plan in place designating what would happen to each partner’s ownership interests should one of you leave the company, get divorced, die, or become incapaciated. Without such a plan in place, along with the funds needed to execute that plan, all sorts of potential problems and conflicts can arise.

 

For example, should your partner die without such a plan in place and the partner’s children inherit his share of ownership in your business, you could find yourself in business with your partner’s kids or be forced to pay an inflated price for their share of the business. A similar situation could arise should your partner get divorced and your partner’s former spouse is awarded a share of the company in the divorce settlement.

 

Estate Planning Solution: To prevent such conflicts, you should create a buy-sell agreement. A buy-sell agreement outlines exactly what would happen to your business in the event an owner leaves the company for any number of reasons, or when one of the owners die, becomes incapacitated, or gets divorced.

For example, a buy-sell agreement can ensure that should certain triggering events occur—like a partner’s retirement, death, or permanent incapacity—the remaining owners are able to purchase that partner’s share of the business. In this way, an effective buy-sell agreement can prevent you from having to deal with new partners you didn’t count on. At the same time, a buy-sell can help prevent your loved ones from getting stuck owning a business they don’t want and can’t sell.

In addition to having a buy-sell agreement in place, you will also need to have a source of funding that allows the surviving owners to buy out the deceased partner’s shares. In most cases, the best way to fund your buy-sell is by purchasing life insurance. For example, the company can purchase a life insurance policy on each of the owners, and the company would receive the death benefit to purchase the deceased owner’s share of the business and/or buy out the deceased’s heirs.

 

Issue #4: If you name a family member to run your company after your death and you don’t provide them with a detailed plan, your business can be ruined by just a few poor decisions.

There are countless stories of family members assuming control of multi-million-dollar businesses and running things into the ground in just a short span of time. If such massive fortunes can be squandered so easily, it’s seriously doubtful that smaller operations like yours will fare much better.

Even if your successor doesn’t destroy your company, he or she can cause serious conflicts among your staff, clients, and family simply by managing the business radically differently than you. For this reason, simply naming a successor to take the reins in your absence is not enough.

 

Estate Planning Solution: A comprehensive business succession plan can help ensure your company doesn’t fall apart when you pass on. Beyond simply naming a successor, such plans provide stability and security by allowing you to lay out detailed instructions for how the company should be run.

From specifying how ownership should be transferred and providing rules for compensation and promotions to establishing dispute resolution procedures, an effective succession plan can provide the new owner with a roadmap for your company’s continued success following your death or retirement.

Secure Your Business, Your Legacy, and Your Family’s Future

If you haven’t taken the time to create a proper estate plan, your business is missing one of its most essential components. During our life & legacy planning process, as your estate planning lawyer, we will work with you to create a comprehensive estate plan to ensure the company and wealth you’ve worked so hard to build will survive—and thrive—no matter what happens to you.

 

Furthermore, every estate plan we create has built-in legacy planning services, which can greatly facilitate your ability to preserve and communicate your most treasured values, insights, stories, and mementos with the loved ones you’re leaving behind. By working with us, you can rest assured that your business and legacy will offer the maximum benefit for the people you love most.

 

You see, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started with a Family Wealth Planning Session.