We’re rolling through busy season, and have begun to connect with many of our great Skagit County area clients. Already wrapped a few very elegant tax returns (if I do say so myself).
One of my favorite things about this time of year is connecting with all of you, and getting updates, offering hope, and putting plans into place.
And I’m glad to say that my questions from the past couple weeks of strategy notes have sparked some great conversations. My hope is that they will continue to.
Just as a refresher, I asked you:
- Is the value of your business firmly established?
- Is there an emergency plan?
- What happens next?
- What are your retirement plans?
- Are all of your eggs in one basket?
- Is there a REAL tax strategy?
… all of which are very important components of a business that’s more than just a side hustle.
We’re all in business for more than just mere business-building. We want to build a LIFE.
So, speaking of life, I want to dial in on one component of these questions. I might take up a few more in subsequent weeks and months. But for now … I want to make sure you have this on your radar — ESPECIALLY as a Skagit County area business owner.
Estate Planning For Skagit County area Business Owners
“Go as far as you can see; when you get there, you’ll be able to see further.” – Thomas Carlyle
When a person with assets over $100,000 passes away (as is the case with MOST business owners), their assets will be handled in one of three ways:
(1) if they had no will, their assets will be distributed as mandated by the state probate code through a court proceeding called probate;
(2) if the person had a valid will, the estate will still have to go through the probate process, but the court will carry out their wishes as stated in their will; or
(3) if the person had a valid living trust (and their assets were re-titled in the name of their living trust), their wishes would be carried out in private, without the court’s involvement.
So … why does this matter to you, as a Skagit County area business owner?
Leaving aside the issue of what happens to the business itself (which is something very much worth its own strategy note — forthcoming at some point), the answer to the question above depends on how much you care about what your loved ones have to deal with after you are gone and how much control you want to have as to who gets what, and when and how they get it.
If you do nothing, you get no input on any of these questions and the court and one of your eager family members/friends/creditors who petitions the court will make these decisions on your behalf through a process called probate.
Why do you care about probate?
Often, the probate process can take 12-16 months, can be extremely costly, and the process is completely public. The probate process can often lead to squabbling between family members and airs the family’s dirty laundry.
If a person leaves a valid will, it will still have to go through the probate process described above, but the court will have the benefit of knowing how you want your affairs handled. Instead of relying on the laws of intestate succession (which is the law that distributes your assets to your family members in the order of their relation to you), the court will pass on your assets to the specific people you have identified in your will.
Through a valid will, you can control WHO gets your assets, but you will have no control as to HOW and WHEN they get it.
A living trust (that has been properly funded), on the other hand, gives you more control. If you are working with someone who has expertise in this field, you can control WHO gets your assets, and WHEN and HOW they get it without the court’s involvement. Even better — with a living trust, it is a private administration and can generally be handled in a short period of time.
You may be asking yourself: why would someone ever choose a will instead of a living trust?
Typically, a person will choose a will over a living trust for one of two reasons:
(1) they don’t know the difference between the two, or
(2) the “cost” of doing a living trust.
There are some obvious advantages to doing a living trust over a will, but starting with something is better than nothing. If you are not yet ready to make a leap into the world of living trusts, then a basic, will-based estate plan is a starting point. In addition to giving the court direction about how you want your assets distributed, a will-based estate plan should also include your advance healthcare directive (which identifies the person(s) that will make healthcare decisions for you, if you’re incapacitated) and a durable power of attorney (which identifies the person(s) that will make financial and legal decisions, when you can’t).
While we all care about what happens to our assets, every person over the age of 18 needs to at least have an advance healthcare directive and durable power of attorney.
We’re a phone call away: (360) 424-1040
We will either help you fix these issues ourselves, or put you in touch with someone competent who can fix them.
I’m grateful for our chance to serve you and your business — and we are dedicated to its success, in every measure.
Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.
Padgett & Padgett, PLLC CPA’s