Does your business plan work with your estate plan?

Business owners spend a lot of their time working in their business with an eye towards growing their business.  Sometimes they are so focused on business planning that they fail to either have an estate plan or fail to coordinate their business plan with their estate plan.  

Some estate planning considerations that you should be concerned with as a business owner are:

  • Who will run the business if you become incapacitated?  Your spouse is not always the best person to step in and run a business.  There may be a key employee or manager that would know the business better and be able to keep it going during the your incapacity. If licensing in required, the you will want to make sure you have a qualified and licensed person to step in to maintain day to day operations. 
  • Will your business have to be sold if you are no longer able to actively participate in the business? When disability or incapacity strikes, tough decisions may need to be made if the disability will be long term and you will not able to run your business.  You will want to make sure you have agreements in place to maintain business continuity without you.  You will also want to make sure your estate plan coordinates with your business plan in this respect. 
  • What happens to the business upon the your death? There are times that the business will have to be sold upon the owner's death, but that may not be what you want or intended.  If there is a family business, perhaps the you want the business to be passed on to the next generation.  In order to accomplish this, there needs be a succession plan in place to make sure the business passes smoothly to the next generation and to ensure that the business is properly structured and financed to handle the transition.
  • Are there partners in the business that have buy out options? If there are multiple owners in your business, it is important to have agreements in place to spell out what happens upon each one's disability or death. You may not want to find yourself in business with your deceased partner's heirs.  A buy out option will allow partners to maintain control of a business but allows the deceased partner's heirs the right to receive the value of the business in the deceased partner's estate.

These are just a few considerations for a business owner.  As you can see, it is important to plan for disability and death, not just from an estate planning perspective, but also from a business planning perspective.  Taking it a step further, these two plans need to coordinate with each other to make sure that nothing is in conflict.  As a business owner who has worked hard to create a thriving business, you don't want to see it lost or harmed by events that could have been avoided by proper planning.

Are you prepared for an emergency or natural disaster?

The hurricanes that have hit the US in the last couple of months have left horrific devastation in their path. Not only are people dealing with clean up from the damage, but they are dealing with various legal issues.  Some of those legal issues involve insurance claims, landlord tenant issues, and possibly bankruptcy as a result of all the loss and overwhelming financial burden as a result. In Michigan, it is not likely that we will see the devastating effects of a hurricane, but there are natural disasters that we could experience, such as a tornado, heat wave, flood, or blizzard, just to name a few.  Are you prepared if a natural disaster strikes close to home?  

There are many different legal issues that arise after the dust settles from a natural disaster.  If a person owns their home, they may have to address insurance claims for damage.  They may find out that they do not have the coverage they thought they did and as a result have damages that are not covered. What coverage might be necessary to protect against the risks of a natural disaster and does it make sense to obtain that coverage? One way to protect yourself for future disasters, is to have your policies reviewed regularly by an agent that will look at the policy with an eye towards a natural disaster.  

Other legal issues arise in the residential rental situation.  A lease agreement may not fully spell out the rights and duties of the landlord and tenant if a natural disaster strikes and the property is damaged.  If there is mold that grows as a result of water damage, what rights does the tenant have to remedy that condition so it is safe to live in?  If the property is destroyed by a natural disaster, what obligation does the landlord have towards the tenant? These are answers that you should know before entering into a lease agreement and ensure that this type of situation is covered. You should also make sure that there is insurance coverage to assist in the losses that may ensue.

Many times the overwhelming loss and financial burden of a natural disaster leaves a family with no option but to file for bankruptcy.  Sometimes having the proper insurance coverage can make all the difference in making sure the financial burden is minimized, but if that is not an option, bankruptcy may be the only way out.

Finally, there are many legal documents that get lost and destroyed when natural disaster strikes.  Not only do people lose titles to vehicles, deeds to homes, but they may also lose their estate planning documents.  Hopefully, they have kept these documents in a safe place but we can not always protect against every disaster and loss.  One way to minimize the risk of damage is to put the documents in a fire safe lock box in the home.  Another inexpensive way, is to put important legal documents in a Ziploc bag and place them in your freezer.  This could provide some protection against water damage and hopefully you can find them after disaster strikes.  Having to re-create all your estate planning documents could simply add an additional financial burden on top of the damage and loss of property.

There are steps you can take now to try to minimize legal issues in the event a natural disaster or emergency should arise.  This will hopefully get you thinking of steps you can take in your own situation to minimize these risk.

Educational Estate Planning Videos Coming Soon!

We are excited to be releasing a series of educational videos featuring answers to frequently asked questions as well as the top reasons to create an estate plan.  Check back soon to have questions answered, such as "What is probate?" and "Why won't a will avoid probate?"