Why Everyone Needs an Estate Plan
Posted by: Joseph Kuo | March 4, 2019
Occasionally, I have clients who tell me that they don’t have assets over $10m (or $20m for a married couple) so they don’t need estate planning. There is a misconception that estate planning is primarily for the super rich who are managing their death taxes. So, it’s worth talking about what estate planning is and what purpose it serves.
What is an estate plan?
At its core, an estate plan is a set of instructions you wish someone to follow when you are no longer able to communicate directly. While this might mean death, it can also mean incapacity and, depending on the instructions, unavailability. Imagine having young kids inherit your wealth while the state decides who their guardians will be. Imagine having the family fall apart due to fighting over what “you would have wanted.” Having proper estate planning documents will give you a measure of control when you are not around. More importantly, it is an expression of you and your legacy to your loved ones.
This is especially important for business owners because you have an asset that is not necessarily, easily transferable or divisible. Thinking about how you will handle this ahead of time, allows you to do what’s best for the business while being as equitable as you can to everyone. The planning process also gives you time to prepare your heirs, whether they actively participate in the business or not.
Typical challenges in estate planning:
- Complications with business partners, if any. If you have business partners, they may not want to work with someone else in your family.
- Whether any heirs want to go into the business and whether they want to develop the skills to run it successfully. What if the kids are still minors?
- How to maximize harmony between family members already in the business versus those who are not.
- How to run the business if you are suddenly not around.
- Determining the value of the business without you.
- Family scrambling for money to pay estate tax, if the business value is substantial but there isn’t enough cash. Your heirs might be forced to fire sell the business to pay taxes.
As you can see, estate planning goes beyond money, it is impacts relationships and can help communicate your values and feelings to heirs. In future articles, I will talk about what’s in an estate plan and thoughts around how to go about putting together a plan. In the meantime, if you don’t have an estate plan yet or haven’t reviewed your existing plan for more than 5 years, I recommend reaching to an attorney specialized in estate planning ASAP.
Even if your life is too busy or you think you don't have time to create your estate plan, you can reach out to me for help completing this very important step for the future of your family and business. Click the link below to schedule a meeting with me or call or email me using the phone number and email address listed in the navigation bar:Schedule a meeting