As you have seen from previous articles, Estate Planning is fraught with pitfalls. Many times, people will attempt to build their own estate plan but, unfortunately, don’t know what questions to ask. My goal is to help you understand the issues that face even modest estates.
A. Improper Disposition of Assets. This occurs whenever the wrong asset goes to the wrong person in the wrong manner or in the wrong time-frame. For example, leaving an entire, complex estate to a spouse who is unprepared or unwilling to handle it. Leaving a sizable estate to a teenage is another good example. The solution is to consider a trust or custodial arrangement and to provide in the Will for young or legally incompetent people. Also, an often overlooked consideration is a “common-disaster” provision so that assets can avoid needless second probates and double inheritance taxes.
B. Ensuring that your business is a Going Concern. What happens to your business if a key revenue-generating employee dies or is disabled unexpectedly? Do you have a “shock absorber” in place? Key employee life and disability insurance coupled with good business overhead coverage will certainly help.
C. Buy-Sell Agreements are essential if your business is to survive the death or disability of one of the owners. Unfortunately, many business: have no such agreement; or the agreement isn’t in writing; or the price doesn’t reflect the current value of the business; or the agreement isn’t properly funded. The bottom line is that the heirs are not guaranteed the fair market value to which they are entitled. If you think you’ll skate by giving a grieving widow a value for her share that “the accountant came up with,” think again. I know of many cases in which that kind of “solution” wound up being settled by lawyers.
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