Failing to Plan: Forego your wishes
As a business owner, if you become incompetent and don’t have an estate plan, the probate court will take jurisdiction over your business interests and the financial guardian or conservator appointed by the Court will become the manager of your business interests. The costs, publicity, inflexibility, time and complexity of any on-going business utterly overwhelm the ability of an overcrowded probate court docket and a hard-pressed probate judge to effectively control.
The result of failure to document your wishes for the continuity of your business after your incompetency or death ensures that the business may not be continued at all, or that the business may be continued contrary to your vision for the business.
Planning in Advance: Choose your method wisely
A will-based estate plan will likely not achieve your wishes for business continuity without much of the disadvantages of Probate disrupting your intentions. In a probate setting there are two distinct managerial shifts after the death of an owner, which often frustrate your wishes for the immediate continuity of business.
- On the owner’s death management shifts from the owner to the estate’s executor.
- When the probate is finally closed and the assets of the decedent’s estate are distributed, management again shifts, this time from the executor to the appropriate heir.
The latter two-step process ensures public disclosure of business operations and a time consuming process resulting in stagnation of business management for often a lengthy period of time. The costs and fees of Probate are a further huge disadvantage to the will-based estate plan, which will be addressed in depth in future articles.
A revocable living trust estate plan, when written with the importance of the continuity of the business affairs of the trustor’s (you) in mind, can altogether prevent the expense, delay, public disclosure of business operations, and lack of management continuity that each of the two inevitable disrupting, and damaging management shifts endemic to probate create. In essence the revocable living trust estate plan can generally ensure a smooth transition of management after you, the business owner’s incompetency or death. The revocable living trust will also avoid Probate and the unnecessary costs and fees that go along with it.
If you, as a business owner, take steps to plan now, much if not all of your wishes for the continuity of your business will be honored upon your incompetence or death.
The bottom line is that if you own a family business or family farm and have done no other succession planning, a probate of your estate on your death will assure that the business operations will be interrupted, made public, and tied up in the red tape of Probate for at minimum one year.
A well written, fully funded revocable living trust will altogether avoid these disruptions, expenses, and publicity.