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Estate Planning

Estate planning is an important part of financial strategy for both individuals and businesses. By establishing a plan for what is to happen with assets and property after a person dies, we are able to maximize wealth and reduce stress for family members and business partners. Estate planning is the process of legally documenting what should happen to assets once a person’s life ends. When done correctly by a qualified professional, taxes, legal fees and court costs are minimal, therefore, maximizing the wealth that is passed forward. Your estate plan should be a living document that gets updated regularly to reflect the changes in your life and the changes in your business.

Estate Planning for Individuals

For individuals, estate planning includes:

  • Life insurance to provide an income source for your family in the event of your death.
  • Detailed instructions for your care in the event that you are disabled and unable to make medical decisions.
  • Naming a guardian for minor children as well as outlining an inheritance plan.
  • Utilizing living trusts, retirement accounts and other qualified strategies to minimize taxes.
  • Outlining how assets are to be divided, including gift-giving programs, donations to charity and detailing how and when disbursements are to be made.

Estate Planning for Small Business Owners

The wealth of many small business owners is directly tied into their business. Likely, the ability to pass on wealth from the business is dependent on a succession plan. This means the business must either be passed down or sold, and the methodology for doing so should be fully explored in an estate plan. For small businesses owners, estate planning includes:

  • A succession plan that allows heirs to either run or sell the business.
  • Life insurance to help provide for your family and to provide an income during the sale or change of management in the business.
  • Living trusts and other qualified plans as a way to pass on wealth while minimizing estate and income taxes.

Estate Planning for Medium to Large Business Owners

Medium to large businesses have a unique set of circumstances making it necessary to plan for how the business will continue to thrive in the event that a partner or owner dies.  Failing to plan for this possibility is a huge financial risk. For medium to large business owners, estate planning should include:

  • A buy-sell agreement where the business is purchased by the remaining partners in the event of one partner’s death.
  • Evaluation of irrevocable life insurance trusts and life insurance policies for business partners.
  • Creation of a succession plan

Necessity of an Estate Plan

The amount of wealth an individual or business has drives estate planning. An estate is essentially the sum of all of the assets a person owns before their death. This includes:

  • Personal property
  • Real estate, including the primary residence
  • Investments
  • Bank accounts
  • Retirement funds
  • Business interests

If there is no plan to handle these assets upon a person’s death, the laws of the state determine how the assets will be handled and distributed. If not outlined, this distribution may be drastically different than what a person would have wanted. Furthermore, the cost of going through probate and not planning well for estate and income taxes can significantly decrease the amount of wealth that is passed on. Should one or more of the heirs contest the distribution, the process to pass on an estate can take years and the size of the estate may dwindled due to legal fees. Having an estate plan in place eliminates theses risks.

Self-Creating an Estate Plan

Although there are a number of tools that can help an individual think about what they want for their estate, the implementation of that plan is best left to professionals. While a self-created plan may be suitable for simple estates, they are not equipped to deal with more complicated issues, such as succession planning, estate taxes and income taxes. Increasing this risk is the fact that errors on estate planning documents can render them invalid, thereby creating a situation where an estate will need to go through probate. In order to minimize expenses, an estate plan must consider ever evolving laws and tax codes, a process that is best done and monitored by a professional.

Finding a Professional for Estate Planning

Finding the right professional to help with estate planning is an integral part of the planning process. It is important to find certified professionals with years of experience in estate planning. In addition to the technical aspect of estate planning, you should feel comfortable with the professional you select and feel as though they fully understand your specific needs before creating a plan. Often, a CPA firm is best equipped to handle estate planning. A firm eliminates the risk of dealing with only one person. Furthermore, a CPA firm with estate planning experience will have the depth of knowledge to look at the estate plan from a number of perspectives to ensure the plan is comprehensive and addresses all necessary items. When looking for an estate planning professional, be sure to consider the following:

  • How focused is the firm on estate planning?
  • Do they have experience dealing with situations similar to your own?
  • How many years of experience does the firm have with estate planning?
  • How does the firm bill for the estate planning process?
  • Do you feel comfortable with them?

The financial firm you choose will play an important role in passing wealth down to your heirs, so it is important that you not only find a firm that offers everything you seek, but that you also feel comfortable throughout the entire process.

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