Estate PlanningRetirement

Estate Planning—Isn’t a Will Enough?

The short answer to this question is, “No; having just a will isn’t enough!” As a family or small business owner, you will want to understand the potentially severe consequences to your business of not having an up-to-date estate plan prepared by a competent estate planner. So, read on to learn more!

What is an Estate Plan?

Your estate is comprised of the assets, wealth and values you have acquired and set in place over your lifetime, including the business you have created with many years of hard work and dedication. Your estate is what you leave behind when you come to the end of life. Your estate plan specifies how you want all that you have created to be distributed—what goes to whom and when they are to receive it. It may also include conditions of receipt. And, of course, you want to do this with the least being taken out or paid by your heirs in legal and trustee fees, taxes, and court costs.

What’s the Difference between a Will and an Estate Plan?

There are four key differences between a will and an estate plan:

  1. A will generally lets you control the distribution of your assets, but not the timing. However, the court may make distribution decisions as well.
  2. A will is subject to probate, a court process that can tie up your assets from six months to as much as two years.
  3. Probate of a will goes through a state-mandated process and usually involves an attorney and a trustee, whose fees are set by the state as a percentage of the total value of your assets. In addition, there are tax consequences which may be considerably higher than those incurred in a carefully constructed estate plan.
  4. Your property transfer documents in a will are public, thereby giving others access to the value of your assets.

For much more on estate planning, please see What is Estate Planning?

How Do I Obtain an Estate Plan?

Estate planning involves a complex set of federal and state laws, IRS rulings and judicial interpretation that affect how assets may be held and how assets and income are treated for tax and title purposes. Estate planning relies on advisors with expertise in legal, financial, insurance and accounting/tax fields. Forming an effective estate plan is a team effort. Your estate planning advisors must work together as a collaborative team focused on your (and your partner’s) best interests.

A qualified estate planning advisor is vital to ensuring your estate plan is comprehensive and avoids costly mistakes. Your estate planning advisor will work with other experts to ensure this. If you own a business, your final estate plan may also involve changes to your business structure, for example, and your estate planner may also work with business experts.

Estate planners commonly hold a degree in finance or law and then choose to specialize in estate planning. They often work within the financial or legal industry, either in private practice or for a larger firm. Many estate planners and personal finance experts pursue a professional certification designation, such as a Certified Estate Planner (CEP) or Certified Financial Planner (CFP).

What about My Business?

If you are a business owner, with or without partners, your business or the portion to which you have rights must also be included in your estate plan. As you work with your estate planning advisor, you may find that your business structure or operating agreement needs to be changed to accommodate your desires. You may also find that you will want to put a buy-sell agreement in place to determine what happens if your business partner passes before you do. Much more on buy-sell agreements is covered in Buy-Sell Agreements? Too Much Trouble!

As a business owner working with your estate planner, you’ll find that you will also want to consider what happens when you retire from your business and when you should start that planning. Estate planning and business retirement planning are interlinked, so it’s best to consider both at the same time. More on this is covered in Business Retirement Planning: It’s a Team Effort!

Where Do I Start?

For the small or family business owner, business retirement planning and estate planning go hand in hand and should be done concurrently and collaboratively. Consequently, you may start on “either end”—if you are already working with a qualified estate planning professional, then ask him or her to help you find a business retirement coach/expert to join the team. Otherwise, you may start with a business retirement coach/expert who will ensure that your retirement team includes an estate planner and all the other experts needed for your particular situation.

When Do I Start?

Now! Because our time of passing is not predictable, the best time to start planning is now. This will give you the comfort and peace of mind that you have provided well for your family whenever this crucial moment might occur.

Congratulations on taking the right steps to ensure your wishes and desires are carried out with the greatest return to your family—and your business partners—at the time of your passing.

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