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Spend time talking to other business owners and you’re probably going to hear about probate nightmares that families, would-be successors and business owners have faced. These problems might include huge expenses, long delays, and complex court battles. Arizona probate problems and probate problems in other states can be time consuming, expensive, and a pain in the neck. In terms of expenses, they might include lawyer fees, filing fees, and publication charges.
Dig a little into the root causes of the probate issues and most tend to be caused by poor estate planning. Most of the issues can be avoided if the decedent leaves their estate in order.
The following advice includes ways that business owners can avoid probate problems.
Write a Living Trust
Writing a living trust is one of the simplest ways to avoid a probate problem. It is an alternative to the Last Will and outlines how you want your assets to be distributed when you pass. In short, it places your properties in trust.
The properties are managed by the trust for the ultimate benefit of the beneficiaries. A living will is an estate planning tool that helps you avoid probate and the cost of probating a Will. This is because your assets and properties are distributed to the trust.
In case your estate includes a significant life insurance policy, creating an irrevocable life insurance trust (ILIT) can help ensure those proceeds aren’t subject to probate. This allows the benefits to go directly to your intended beneficiaries without delay.
Write a Will
If you’re a business owner and die without a will, the probate law of the state takes over and manages the distribution of your properties and assets to the proper parties. When a Will is probated, property is distributed according to the Will. However, the presence of a Will doesn’t mean probate is skipped.
What a Will does is reduce the cost of probate and inform the probate court what you want to happen to your business and other assets.
It’s best if you look for a lawyer to help you write a will. In addition, you’ll need to appoint an executor to handle your estate for you when you die.
Another good idea is to assign someone to manage your business while probate is taking place and arrange a Power of Attorney in the event of disablement or incapacitation.
Establish Real Estate Joint Ownership
In probate, real estate may be considered a business asset whether the property is owned independently or rented to your business. Arranging joint ownership is something you can do if you want to eliminate or mitigate a probate issue.
Joint ownership will include a detailed survivorship plan, a transfer on death deed or a life estate. If business real estate has joint ownership, the title will be transferred to the remaining owners if one owner passes away.
Create a Business Continuation Plan
Having a succession or continuation plan can also help to avoid a probate issue. The plan states who will hold the business ownership when you pass.
When you’re writing the plan, you have the opportunity to consider your family and the best interests of your business. For example, you might want to assign another business partner to manage the business, while a family member owns it.
A continuation business plan is prepared in advance. With such a plan in place, business operations can continue. However, the business will not continue if the probate judge orders liquidizing of business assets to pay debts.
Keep Your Assets Separate
Aim to maintain a clear distinction and separation between personal and business assets. If you don’t do this, it can become very difficult to untangle the two in your estate planning.
You may already have done this for tax purposes and to help shield yourself from liability. However, it’s especially important if you want to avoid probate with your business assets.
Think and Act Ahead
It’s possible to avoid most probate issues if you set up an estate plan. Tools that can help your successors, remaining business partners and family members include a trust, a Will, power of attorney, joint ownership of real estate and a business continuation plan.
If you have these in place before you die, it will help avoid the headaches and nightmares of a tedious probate process. You should also consider seeking a specialist lawyer to help you with your estate planning.
