Tag Archives: business

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Business Owners Need Estate Plans

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Business owners need estate plans in order to ensure their businesses survive once they pass away. Here is why. Let’s say you own a successful business. It has lots of employees and ongoing business. There are contracts that need to be completed, and staff that needs to be paid. Then you die. You have a Will that names your spouse as the Personal Representative (executor). However, Wills need to be probated, and normally the soonest that can happen is one week from the date of death. Assuming there aren’t any hangups (such as the Will failing to waive bond), the surviving spouse can be appointed as Personal Representative right away.

But a week can be an eternity in the business world. Employment laws dictate that payroll needs to be paid within a certain time after the pay period ends. And what if there are employees in the field who need expenses covered?

Also, who is going to manage the business until it gets sold? Selling a business can’t be done in a matter of days. It takes time. Can your business last the months is normally takes to find a buyer and arrange a sale?

Here is the best way to plan ahead of time. The best way to plan ahead is to have a revocable trust that names a responsible (and business savvy) trustee to take over if you can no longer manage your business. Then make sure that your trust owns the business. If your business is an LLC, the member of the business needs to be the trust. (In other words, you will file Articles of Amendment for your LLC that replaces you as the member with, for example, “John Doe, Trustee of the ABC Trust, dated January 1, 2014.”) Make sure the trust language permits the trustee to manage an ongoing business, and that it permits the trustee to delegate the responsibility of managing the business to a replacement business manager.

NOTE: The word “manager” is used in two different ways here, and it can be confusing. The “manager” of an LLC is the person listed with the Secretary of State as the person in charge of the LLC. However, in terms of managing a business, that may be completely different people. I normally assist clients in this regard by having the LLC Manager (the person named as the official manager on the Articles of Organization) sign a Resolution naming one or more assistant managers. These assistant managers are the people who are actually on the ground running the business: making sure that paychecks get signed, continuing marketing efforts, meeting with clients, etc.

You can read more on this topic at an enterprise.com article here.

Have you heard of situations in which the business owner died and the business struggled as a result? Do you have any insights? Please share below.


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Administering a Trust with an Ongoing Business

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Administering a Trust with an Ongoing BusinessAdministering a trust with an ongoing business can be intimidating and overwhelming. It is even more tricky if the business needs to go through probate. And for good reason.

As a trustee or personal representative, you will be held to a high standard as you administer the trust, a standard higher than that the original owner was held to. And if you have specific knowledge (such as having owned a business before, being an attorney or CPA) you will be held to a higher standard still.

Here are three steps you can take as a trustee or personal representative that will help you better manage your responsibility as well as reduce your liability as you administer an estate or trust that has business or complex investments:

  1. Assemble a team. Even if you have experience with owning and operating a business or in managing an investment portfolio, you can be held accountable for making decisions that have a negative impact on the viability of the trust’s business or assets. Seek help from qualified professionals (CPA, probate attorney with experience working with businesses and other relevant advisors.)
  2. Delegate control. You need to find a qualified person to take responsibility or accountability for his or her actions in managing this business and operating it. That person must be committed to making the right decisions, even difficult ones such as firing family members. (This in particular is a common and difficult decision that must be made with a number of trusts.)
  3. Maintain communication. As personal representative or trustee, it’s your responsibility to keep beneficiaries informed of the state of the business or other assets.

Passing along the commitments and responsibilities of a business and business assets through a trust can be complicated. The trustee or personal representative who administers the estate should understand the responsibilities of the position.

Without information, knowledge and expertise needed to run a business profitably, the trustee can be held liable for a decline in the business. Assembling a team and delegating control are two critical steps a trustee should make to maintain and manage the assets. Be sure to keep the beneficiaries informed and in the loop regarding the state of affairs.

If you need help understanding the duties of a trustee and how to manage a business or other complex assets in a trust, we’d love to help.

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