BUSINESS ESTATE PLANNING

 

Unique Planning Problems for Business Owners:

Business owners are often so busy making their enterprises grow they sometimes don’t get around to considering the “What if’s.” Below is a basic primer on the elements of a good estate plan.  But keep in mind that small business owners have an additional set of issues to deal with relating to the continuation of their business.  While the specific issues are unique to your business some of the common questions that arise are as follows:

How will the business continue after I’m gone?

How can I fairly compensate nonparticipating heirs with out destroying the business?

Should I just sell the business and distribute the proceeds?

We can construct a competent estate plan for you as well as address the issues unique to your small business.

What is an Estate Plan?

An Estate Plan, simply stated, allows others to know and implement your wishes more effectively and avoids stress and squabbling among the parties involved.  An Estate Plan typically contains the following documents:
     1)
A Living Will
     2)
A Will (with a Testamentary Trust if applicable)
     3)
A Financial Power of Attorney
     4)
A Health Care Power of Attorney
     5)
A Living Trust (if applicable) 

  Living Will

 What is a Living Will (a.k.a. Physicians Directive)?   A Living Will is a declaration that you desire to die a natural death.  It states you do not want extraordinary medical treatment or artificial nutrition or hydration used to keep you alive if there is no reasonable hope of recovery.  A Living Will gives your doctor permission to withhold or withdraw life support systems under specific conditions.  A Living Will allows you to make this decision ahead of time.  If you do not have a Living Will, your family is burdened with the decision.  Your family may not be able to agree on what action to take, as in the Terry Schiavo case.  The lack of decision by your family may lengthen your suffering and increase your medical bills.  A Living Will removes the decision from your family's shoulders and makes the decision yours.
 

What are those “Specific Conditions”?
The Living Will gives your doctor permission to withhold or discontinue life support systems under two conditions. Under the first condition, you must be both terminally and incurably ill. Under the second condition, you must be diagnosed as being in a persistent vegetative state. If two doctors diagnose one of these conditions, your doctor may withhold or discontinue extraordinary medical treatment or artificial nutrition or hydration as directed by your Living Will.
 

What are the requirements for a Living Will?
You must be at least 18 years old and of sound mind when you sign a Living Will .  A Living Will must contain specific statements to insure that it is valid in the state of Utah.  You must sign your Living Will in the presence of two witnesses who are not: 1) related to the declarant by blood or marriage; 2) entitled to any portion of the estate, by law or will; 3) responsible for declarant’s medical care; 4) agents for any health care facility in which the declarant is a patient at the time the directive is executed.

 Warning!
Beware of using a Living Will form provided in a magazine article or distributed by national organizations.  These forms may not contain the statements required to make the Living Will valid in Utah.

 Will and Testamentary Trust

 What is a Will and a Testamentary Trust?   A Will is a set of instructions regarding the care and guardianship of your children, and/or it also gives you the opportunity to say how you would like to have your assets distributed.  A Will alone will distribute to each child, at the age of 18, their entire inheritance.  A Testamentary Trust is designed to let you control at what age and/or under what circumstances an inheritance is distributed.  A Testamentary Trust helps prevent the premature squandering of a childs’ inheritance.

Who should have a Will? 
Every person who owns real property, or has a spouse and/or children should have a will.  It will be one of the most important legal documents you will sign in your life time.

What happens to my minor children if I die without a Will?  If you die without a Will or you don’t name a guardian in your Will, anyone who wants the position can ask for it.  A judge then must decide, without the benefit of your opinion, who will do the best job raising your children.  A judge is then responsible for overseeing the guardian and your childs’ affairs until the child is of age.  
 
What happens to my property if I die without a Will?  If you do not have a Will your property will be divided among the survivors according to state law and the court will designate an administrator to handle your affairs.  Without a Will it is possible that your property will be divided among surviving family members contrary to your wish.  Certain kinds of property, such as proceeds of insurance policies with designated beneficiaries, IRA’s and property owned jointly with survivorship rights are not affected by these laws.   

Do I need an Attorney to make a Will?
The simple answer is no, under the laws of Utah you can have what is known as a holographic will.  A holographic will is a hand written will, signed by you and does not need witnesses.   However, that type of will is one that is easy contested and may result in more questions regarding your intent for your estate than answers.

 Powers of Attorney

 What is a Power of Attorney?  A Power of Attorney is a document which gives someone authority to act on your behalf on matters that you specify.  A spouse does not need a Power of Attorney, however anyone other than a spouse needs a Power of Attorney to act on your behalf.  The power can be specific to a certain task or broad to cover many financial duties.  The power can start immediately, or only after some event such as mental incapacity. A Power of Attorney that continues to be in effect even if you become mentally incapacitated is known as a Durable Power of Attorney. Having a Durable Power of Attorney stops the court from stepping in and taking control of your finances. Without a Durable Power of Attorney, the court would appoint someone to make decisions for you.  The authority granted in a Power of Attorney ceases at the death of the person granting the power. 


What is a Power of Attorney for Health Care?
This is an example of a specific type of Power of Attorney.  It allows a designated person to make decisions for you if a specific event occurs and you are unable to speak for yourself, such as in the event you become unconscious as a result of an accident or if for some reason you become mentally incapacitated.

Warning!
A Power of Attorney is a very important and powerful document.  It allows you to delegate to your Attorney-in-Fact  broad powers to dispose, sell, convey, and encumber your real estate and personal property.  These powers will exist for an indefinite period of time unless you limit their duration in this document. The powers will continue to exist notwithstanding your subsequent disability or incapacity.  You have the right to revoke or terminate this durable Power of Attorney at any time.

Living Trusts:

What is a Living Trust?  A Living Trust lets you control distribution of your estate and avoid probate if it is properly funded, which means all assets must be in the name of the trust.  Since Living Trusts are considerably more time-consuming to establish, involve more ongoing maintenance, and are more trouble to modify, the question “is a Living Trust right for you at this time in your life?” is something we would have to discuss.  If you are 60 or older, a trust is something you might want to consider, or, regardless of age, if the net value of both husband and wife is over 1.5 million dollars, a Living Trust might be a good tool to avoid estate taxes.

 

Brought to you by Business Law Associates, L.C., Utah's Small Business Law Firm, 8170 S. Highland Dr, Suite E5, Sandy UT  84093, 801.944.5255.