Family Businesses & Succession Plans
One of the biggest reasons people plan is to avoid potential pitfalls and issues. Even the smallest estate is more complex than most realize. When you sit down with your attorney to create the plan that fits your requirements, not only will you identify the problems before they occur, but you will also prevent them.
A family business can be challenging to incorporate into an estate plan, but it can be done by an experienced and skilled estate planning attorney. Let us show you how.
How To Misplace A Farm
Imagine that a family owns a farm, and it is their primary means of income. Their land is their business. The farm owners have three sons, and before they pass away, they give the land to all three of them.
Several years go by. One son passes away. The other moves to another state. And the last one stays and works on the farm throughout his life. There’s a problem here, but it hasn’t surfaced yet. Here it is:
The son who moved away owns half of the farm. As part of his estate plan, he plans on passing his share of the farm to his children. The other son, who has worked on the farm his whole life, only owns half of the farm. His brother’s children—his nieces and nephews—are part owners of the farm he spent his career working on.
Is that fair? The answer to that question is irrelevant to the outcome. There’s a chance this situation could have been avoided entirely.
Other Solutions
An estate planning attorney could have seen the potential pitfalls of leaving behind a business to three people equally. What’s more important is that the attorney would have likely presented other options.
Were there any cash assets aside from the business? Whereas the cash assets could have been given to the children who weren’t going to inherit the business. The same applies to life insurance policies. The policy could have been divided in such a way as to balance out what each son was going to receive.
There are a significant number of ways you can solve this problem. Your attorney recommends and advises you throughout the process. For instance, the parents may have been able to transfer ownership of the farm to one son during their lifetimes. Furthermore, an attorney could explain how that one son could’ve increased his share of the farm the longer he worked on it.
Elder Advisors Law
Get proactive with your estate planning to prepare for the future. If you have any further questions regarding estate planning, contact Elder Advisers Law to schedule a consultation. For more information, sign up for a complimentary workshop designed to educate and help anyone new to estate planning.
