Put Estate Planning on Your Bucket List


When the time comes for checking your financial to-do list, estate planning is most likely  the last item you’ll get to—if you get around to it at all.  It is estimated 120 million Americans lack an up-do-date estate plan. Business owners also need to add succession planning to their checklist to ensure an effective transition following the founder’s retirement or death. The New Year is a great time to organize your assets to avoid family fights and prevent a majority of your estate from going to the government. Tom Jones, shareholder and chair of the corporate practice group at Chamberlain Hrdlicka (Atlanta), discussed the following essential  considerations for estate and succession planning: Boomer:  What are the limitations of my will? Do I need a trust? Jones:  In many cases, a will alone is sufficient and separate trusts are not necessary to provide a fully functional estate plan. Also, many wills contain trusts within the will document itself for tax planning and family protection purposes. In larger estates, however, there will almost always be a need for one or more trusts in addition to the will. For example, it is very common to establish a separate trust to hold life insurance policies in a manner that will remove the policy proceeds from the estate of the individual insured for estate tax purposes. Boomer:  What of my estate assets will be taxed? Jones:  Generally speaking, all of the property and assets of a U.S. citizen or resident, of whatever nature and wherever located, will be subject to U.S. estate tax at death. In fact, some property interests that one might not expect to be counted as the property of the deceased person will be included in their taxable estate, such as property not actually owned by them but over which they have legal control. As part of the estate planning process, it is important to develop a full inventory of all such property and property interests in order to project likely estate tax obligations at death. Boomer:  How can I prepare my heirs to receive their inheritance? Jones:  This will vary from family to family. In some cases, it is possible, indeed healthy, to have full, frank and open discussions with children about the nature of the estate that they are likely to inherit in the future. In other situations, due to family discord or particular issues with one or more of the beneficiaries, such dialogue may not be useful and may even be counterproductive.   Boomer:  What is business succession planning and how do I know if I need this advance planning? Jones:  Business succession planning typically refers to the process of transition when the owner of a closely-held business retires or dies. Every business owner should have such a plan, whether it involves transitioning ownership and/or management of the business to employees or family members or potentially selling the business to a third-party. It is never too early to begin considering these transition issues. Boomer  What are some of the choices available to a business owner to plan his or her estate and transfer interest in a family business? Jones:  One type of plan that is frequently utilized involves giving voting control of the business to the “heir apparent” who is actively involved in management of the business while providing non-voting shares of the company to the other children who are not actively involved in management. Transition plans involving non-family employees often include the purchase of shares in the business over time.   In some cases, an ESOP, or employee stock ownership plan, may be a very effective transition tool.   In all cases, the business owner and his or her advisors should devote careful analysis to the legal, tax and human factors that will ultimately determine whether the plan succeeds or fails.