As a self-made individual, you only want the best to protect your assets and business when you retire or passed away. Estate planning is just as important for business owners and entrepreneurs as anyone else.
In this article, we'll go over the importance of estate planning and how entrepreneurs can make estate plans that suit their unique situations.
Why is Estate Planning Important?
Estate planning allows you to make plans for what happens to your belongings after you die. With the help of an experienced lawyer, you can create documents like a will or trust that allow you to easily distribute money and assets to your loved ones.
Your estate includes all your assets, such as:
- Bank accounts
- Vehicles
- Personal property
- Artwork and jewelry
- Investment portfolios
- Digital property
By adding beneficiaries to your will and trusts, you can make sure your friends and family receive their inheritances as smoothly as possible.
The Probate Court
If you don't create an estate plan, your assets will automatically go to the probate court so a judge can determine what to do with them. The court uses local inheritance laws, and generally, your assets will go to your closest family members, including your spouse, children, and other relatives.
However, the court may not distribute your assets the way you would yourself. You may have specific ideas about who gets how much money, or who will inherit a valuable piece of artwork.
The court will also focus on blood relations. If you intend to leave anything to a friend or a romantic partner you aren't married to, it is essential to create a will. Creating a legal document gives you total control over what happens to your belongings after your death.
An estate planning attorney will be familiar with the local laws and probate courts, which means they'll be able to create legal documents that are valid and will be held up in court.
Below are three estate planning tips to consider:
1. Get Started as Soon as Possible
It's never too early to start planning for the future and setting up an estate plan is one of the best things you can do for your loved ones. In the event of your death, they would need to settle your debts, make plans for your burial, and continue paying regular bills.
Setting up clear beneficiary designations can prevent confusion, arguments, and other issues. It also ensures that everyone will get their inheritances sooner, with less delay due to probate court. If you have business partners, they too might have some stake in how you divide up your assets. For example, they may need work vehicles, heavy-duty equipment, or even property that you use to conduct business.
Your lawyer can point out potential issues far in advance, giving you time to address them and resolve them before they affect anyone.
By making your estate plans well before you need them, you can make sure that your plan is in place when you die. A clear plan will make things easier for your loved ones as well as your business partners or employees.
2. Update Your Plans Regularly
Once you go through all the trouble of filing your documents, you'll likely feel relieved. However, it's a good idea to meet with your lawyer occasionally to update your will and trust. This is especially important if you've gone through any major life changes recently. That might include a divorce, a new marriage, or having children. You'll need to update your beneficiaries to add or remove people as needed.
For business owners, it's important to consider the purchase of work equipment. If you make a major purchase under your own name, it could be difficult to give it to your partners who need it.
Any major financial changes may also be cause for an update to your plan. If you buy or sell property, get a new life insurance policy, or make any other major changes, you'll want to include those in your plan documents.
Maintaining your estate plan ensures that it's reliable and will be considered valid in court. Minor inaccuracies could otherwise invalidate a will or trust.
3. Think About Asset Protection
Many business owners are public-facing figures who interact with individuals from all walks of life. Asset protection trusts are designed to keep them safe from creditors and lawsuits.
Litigious clients may threaten to sue, seeking either a settlement or a damages payment. However, putting key assets in an asset protection trust will ensure you won't lose your home or go bankrupt over a lawsuit. It can even discourage people from taking legal action against you in the first place.
Asset protection trusts are different from living trusts. The latter allows you to maintain control over the assets within, and they can be altered at any time. By contrast, the former cannot be altered, and you won't have direct control over the assets in them.
When the trust is structured correctly, your assets will be guarded against potentially draining legal action, medical expenses, and other concerns. Transferring assets is one of the most important parts and may require help from financial professionals or brokers.
Asset protection is a complex legal field, and only a practicing attorney can guide you through it effectively. However, it has numerous benefits, including potential tax breaks. For many business owners, it provides peace of mind.
Hire a Qualified Orange County Estate Planning Attorney
Business owners and other self-made individuals may be used to handling things themselves, but when it comes to legal concerns, it's always worth hiring an Orange County estate planning attorney.
Our firm is headed by an attorney with over 20 years of experience in the field of estate planning and as a financial consultant. Our legal team provides personalized advice, and we've worked with many business owners over the years.
To schedule a consultation and learn more about our financial and legal services, contact us at 562-594-4200 at McKenzie Legal & Financial today!
