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Growing a business is no easy undertaking. There are plenty of challenges to overcome before you achieve success. Therefore, you want to make sure that everything you worked hard for will be maintained even after you’re gone. 

To ensure your business interests are well taken care of after your demise, there are plenty of provisions and documents you have to set up in advance. This process is called estate planning—a business owner’s guide for the future. 

Estate planning is the process of making preparations so that all your assets, or your ‘estate,’ will be entrusted to the right people in the event of your demise or incapacitation. 

Aside from the bequeathal of assets, estate planning also involves the settlement of estate debts and taxes, including other considerations, such as pets and the guardianship of minors. So, where do you start?

This post will teach you how to protect your business and assets through estate planning. Take a look at what you need to know below.

Should You Hire A Lawyer When Writing An Estate Plan?

You can write the legal documents that constitute your estate plan. The internet offers many do-it-yourself (DIY) estate planning templates that let you create your own estate plan. 

But the question is, should you do the entire estate planning process yourself? Additionally, will those DIY estate documents be valid in court? 

If you’re not confident writing your own estate plan, it’s best to leave the job to the professionals—the estate planning lawyers. 

An estate planning lawyer is trained to handle matters related to the bestowal of assets in the event of your death. These include the following:

• Preparation of a will that won’t be easily contested when you die
• Setting up a living trust
• Transferring assets into the chosen trust 
• Overseeing trust asset management
• Setting up guardianship for your children
• Tax planning 
• Transferring of wealth
• Charitable giving
• Planning for unexpected situations (e.g., the death of one of your beneficiaries)
• Creating a living will that outlines your decisions before death
• Granting someone a power of attorney for healthcare and financial matters
• Answering questions regarding estate planning and related laws

If you need a lawyer to help you, visit a law firm specializing in estate planning and related matters, such as Two Spruce Law P.C. in Bend.

Why Should You Hire An Estate Planning Lawyer?

 Here are the reasons why you should consider hiring an estate planning lawyer:

• They Help You Avoid Probate

Probate is the process of transferring an estate to the rightful beneficiaries. It’s expensive, lengthy (may take up to two years), and highly complicated. Hiring an estate planning lawyer can help you avoid probate and all of its nuances and may assist your family should these become necessary.

• They Offer Protection

The primary role of an estate planning lawyer is to protect you, your family, and your assets. They help prevent the use of a wrong word and missing signatures, which make your family unprotected in the event of your passing. Hiring an estate planning lawyer ensures everything is covered, giving you peace of mind.

• They Help Reduce Tax Liabilities

Your estate might be liable for federal estate taxes. To find out, subtract your gross estate from other deductions (e.g., debts) to get the net estate. If your net estate is less than the tax exemption limit of USD$12.92 million, you owe no taxes. Otherwise, the amount will be taxed up to 40%. Hiring an estate planning lawyer ensures that you’re prepared with these taxes.

• They Help Avoid Mistakes

Mistakes can make the process more traumatizing for your family. These can include an inadequate estate plan and failure to complete the process and update the estate plan when necessary. An estate planning lawyer helps avoid these mistakes, which could contribute to additional costs (e.g., court fees, professional fees, and taxes).

What Makes Up The Estate Planning Process?

Estate planning determines how your assets will be managed and distributed in the event of your passing. It also involves how your properties and financial obligations will be preserved and handled if you become incapacitated. 

Contrary to what everyone believes, an estate plan isn’t just for millionaires and billionaires. Everyone may consider estate planning, regardless of their status.

Here’s the estate planning process:

1. Create A Will

What is a will? It’s a legal document that provides clear instructions on how you want your assets to be managed after your death. It states your last wishes and the name of the person who will fulfill your stated intentions—a trustee or executor. 

The will also specifies whether a trust should be established after your demise. Depending on your intentions, a trust can be created throughout your lifetime with a living trust or after your death with a testamentary trust. 

Before everything you own is bequeathed to your heirs, probate will determine whether your will is authentic. Your custodian will take your will to the probate court or to the trustee stated in your will within 30 days of your death. 

Once verified, the court will give the executor stated in your will a legal power to act on your behalf.

2. Create A Trust (Living, Irrevocable, Testamentary, And Pet Trust)

A trust is a legal document that establishes a structure that protects and manages your assets. There are different types of trusts used in estate planning, with each having different benefits and attributes. These include the following:

• Living Trust

A living trust, or revocable living trust, allows you to appoint someone to manage your assets in the event of your demise. When you die, the trustee you appoint will take control of your assets. They will keep your wishes private and ensure your assets go to the right people.

Also, a living trust can help avoid probate.

• Irrevocable Trust

Unlike revocable trusts, irrevocable trusts remove your control over your assets. This removal of control protects and isolates your assets in a way that revocable trusts can’t.

Irrevocable trusts are something you can’t change anytime you want. Once set, it can’t be modified, no matter what you do. In the end, the right one will depend on your goals, needs, and preferences.

• Testamentary Trust

Testamentary trusts are trusts created in accordance with your will and only take effect the moment you die. 

In addition, testamentary trusts are ideal for individuals whose beneficiaries include minor children and people with addiction problems.

• Pet Trust

Are you a fur parent? If you do, you might want to consider building a pet trust. 

A pet trust allows you to create funds for your pet’s care when you can no longer provide everything they need. It also allows you to appoint someone who can care for them when you die or become incapacitated.

3. Choose The Right Executor Or Trustee

An executor or trustee is a legal representative approved by the court. They’re in charge of locating and managing your assets when you die. Also, they have to estimate the value of your assets using an alternate valuation date or date of death value.

• Alternate Valuation Date: This allows the executor to estimate the value of your estate on the day of your death. The value will persist within six months, starting from the day of your death. However, the value will change once sold, distributed, or exchanged within the period. 
• Death Value: This refers to the fair market value of your assets, including your bank accounts, investments, and retirement accounts. 

Another role of your executor is to pay off the taxes and debts you owe from your estate. Creditors will be given enough time to make claims after they’re notified of your death. Your executor can reject such claims and take them to probate court, where the judge will decide whether the creditor’s claims are valid.

Your executor will also file your last personal income tax returns after your death. Once everything has been finalized, your executor will ask the probate court to authorize them to distribute the remains of your estate to your heirs.

4. Establish The Power Of Attorney And Healthcare Directives

A power of attorney (POA) grants someone the authority to act on your behalf. There are two types of POA you can use: durable POA and special POA.

• Durable POA: This allows someone to make financial decisions in the event of your incapacitation.
• Special POA: This allows someone to execute only the tasks, circumstances, or conditions you outline. 

Healthcare directives are legal documents that provide instructions regarding your healthcare wishes when you become unconscious or unable to communicate. These include the ‘Do Not Resuscitate’ order, which states that the person no longer wants to undergo cardiopulmonary resuscitation (CPR).

5. Create A Succession Plan

A succession plan is a blueprint that ensures a seamless transition of management, operations, ownership, and power to succeeding owners in the event of your demise. Also, it ensures that the person who takes over your position is someone you truly trust.

With a succession plan, your stakeholders will be at ease, knowing there will be a transition that aligns with your mission and vision.

Final Thoughts

Estate planning can help preserve the condition of your business after your death. It ensures that your assets will be protected and bequeathed to the right people in the event of your death. 

Also, estate planning allows you to choose someone you want to take over to ensure your business will continue thriving after your death. Be sure to keep your estate plan updated as the value of assets changes from time to time.