When a business owner dies without having done any estate planning, ‘there will be court intervention,” says Thesenvitz. The corporation could end up being run by a judge in a courtroom. “Unnecessary time, complexity and expenses will mount up when a business owner dies without a will. There will likely be no good way around a public, time consuming and stressful probate if a business owner dies without a will,” he says.
Keeping assets out of probate court
According to Thesenvitz, there is more than one way to keep business assets out of the scrutiny of a probate court. One way is for the company owner to create an estate plan that calls for assets to be secured in a trust. If that happens, “business succession can happen without any scrutiny of a probate court,” he says.
When a family-owned business includes an older generation, the owner may wish to establish a family limited partnership where ownership is slowly transferred to the younger generation through asset gifting that occurs over several years, he explains. One reason some business owners may shy away from this option is that they must give up control over their enterprise, and they may not want to do that, says Thesenvitz.
Susan Wasserman, an attorney with 40 years of estate planning and guardianship experience in Columbus, Ohio, says other ways to keep assets out of probate beyond estate planning include:
- Updating the estate plan as assets and other considerations change
- Establishing back-up plans
- Ensuring second family and potential conflicts of interest have been accounted for
Another important tool for a small business owner to have in place is a Power of Attorney (POA), says Wasserman. There are several types of POAs anyone, small business owner or not, might want to have prepared, in case they are ever needed. They include POAs for health care, overseeing finances and even a Living Will that instructs caring physicians and family members of the person’s desire to have all life support machines pulled.
Because it’s likely a business owner maintains multiple online accounts to help them run their enterprise, it is imperative a plan for revealing otherwise secret passwords is contemplated, too, says Wasserman.
Estate planning is generally governed by state law, so it is wise to consult with an attorney familiar with those statutes and their intricacies to ensure a viable, effective estate plan has been created. It is also noteworthy that Federal laws play a role in estate planning for estates valued over $5,430,000. That’s because an estate of that size has federal estate tax implications, says Thesenvitz.
Tami Kamin Meyer is an Ohio attorney and writer.