Probate law is an important reality to think about in the here and now, especially since it can so greatly affect one’s family in the future. This is even more true the grander and more complex someone’s assets become. Business owners should think ahead about how to divide such assets after death. If businesses remain under different jurisdictions and therefore are subject to different authorities, the need for planning is even greater.
Only 42 percent of adults in the U.S. have even the simplest of estate planning documents are drawn out. That means the majority of us haven’t even drafted a last will and testament. Those we leave behind will inevitably have a mess on their hands after we pass away, and they might not inherit anything at all–depending on the situation.
If there is a small business and there is no plan in place to manage affairs after the company owner becomes deceased, then that means they’ll have to navigate those unfamiliar waters themselves. If there are business partners, how can small business owner ensure that they are aware of his or her wishes? These are conversations that should be happening now, before the consequences of not having them become apparent later.
The biggest reason that anyone consults with an estate planning lawyer is the protection of assets. This can relate to estate taxes owed or the prevention of asset seizure for a variety of reasons. Although it’s dependent on the nature of the business in question, there’s a good chance that the deceased’s family will need to sell it in order to pay the estate taxes owed–and they only have nine months to complete the entire process, at most. That means that they’re probably not going to get anywhere near what the business is really worth. This consequence assumes the owner died without any estate planning in place.
Estate planning attorneys will often counsel to take advantage of Section 303 and Section 6166, both of which are important tax breaks that his or her heirs can take advantage of to help pay any taxes due. 6166 , in particular, an be used to defer the tax owed. This will allow the tax to be paid in installments, rather than lump sum. Since the first installment can be deferred up to five years, the heirs have a healthy amount of time to use profits from the business in question to pay for the taxes without actually having to sell the business.
These are just a few of the potential advisements one might receive during the estate planning process, but the number of reasons to consult a lawyer are endless.