ESTATE PLANNING FOR BUSINESS OWNERS
By Attorney Randall J. Andersen
March, 2012
By Attorney Randall J. Andersen
March, 2012
Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.
When it comes to estate planning, it is all too easy to procrastinate. Estate planning does not have to be complicated or expensive. It is important to understand your options, and implement an estate plan which is appropriate in light of your financial and family situation.
Will vs. Living Trust?
Estate planning goals can be accomplished through either a basic will, or a living trust (also known as a revocable trust).
The advantage of using a will as your primary estate planning document is that it is generally less expensive to have a will prepared as compared to a living trust. A will is normally a shorter, simpler document than most living trusts.
There are multiple advantages to the living trust, particularly for business owners.
One of the biggest advantages is that a living trust can avoid the need for a probate proceeding upon your death. The use of a living trust (assuming it is funded before your death) allows your heirs to implement your wishes without the time and expense associated with probate. In Wisconsin, probate occurs in the circuit court of the county where the decedent lived. Probate files are open to the public (although steps can be taken to have the “inventory” of the estate not disclosed to the public). Administration of a living trust upon death can maintain a higher level of privacy for the family.
Probate avoidance is particularly attractive if real estate is owned in more than one state, which could require a separate probate proceeding in each state. This can be avoided with a living trust.
Another advantage of a living trust is that it allows you to appoint a trustee who will handle your business and financial affairs in the event you are incapacitated during your lifetime. A will, on the other hand, only takes effect on your death, and cannot be used for this purpose.
Powers of Attorney.
All competent adults in Wisconsin should have a health care power of attorney, designating someone to make their health care decisions in the event they are unable to do so for themselves.
A power of attorney for finances (not to be confused with the health care power of attorney) allows you to appoint someone to handle your financial affairs during your lifetime if you are unable to do so yourself.
Living Wills.
You may have heard of the “living will,” which is very different from the “living trust” discussed above. A “living will,” also known as the “Declaration to Physicians,” allows adults in Wisconsin to state their preferences for life-sustaining procedures and feeding tubes in the event the person is in a terminal condition or persistent vegetative state.
Estate Taxes.
The issue of estate taxes has disappeared from the radar screen of many people. Wisconsin has not had a state inheritance tax or an estate tax for several years. The federal estate tax exclusion amount for persons dying during 2012 is $5,120,000. However, the federal exclusion amount is scheduled to return to the previous level of $1,000,000 for persons dying on or after January 1, 2013. There is speculation that Congress will act to retain either a $3,500,000 or $5,000,000 exclusion, but in our present fiscal and political climate, it is anybody’s guess as to what will happen. Well drafted estate planning documents should plan for the possibility that the federal estate tax exclusion may return to the $1,000,000 exclusion level.
Special Circumstances.
Many business owners have some special circumstances which must be accommodated in order to meet their need and intentions in their estate plan. Examples include children who have special needs or who receive governmental assistance, second and third marriages and children from prior marriages. The family and financial situation of the client must be considered carefully before making decisions as to what type of estate plan is appropriate.
Estate planning for business owners does not need to be complicated or expensive. The important thing is to understand your options and adopt and implement a plan which is appropriate for your particular situation.
Will vs. Living Trust?
Estate planning goals can be accomplished through either a basic will, or a living trust (also known as a revocable trust).
The advantage of using a will as your primary estate planning document is that it is generally less expensive to have a will prepared as compared to a living trust. A will is normally a shorter, simpler document than most living trusts.
There are multiple advantages to the living trust, particularly for business owners.
One of the biggest advantages is that a living trust can avoid the need for a probate proceeding upon your death. The use of a living trust (assuming it is funded before your death) allows your heirs to implement your wishes without the time and expense associated with probate. In Wisconsin, probate occurs in the circuit court of the county where the decedent lived. Probate files are open to the public (although steps can be taken to have the “inventory” of the estate not disclosed to the public). Administration of a living trust upon death can maintain a higher level of privacy for the family.
Probate avoidance is particularly attractive if real estate is owned in more than one state, which could require a separate probate proceeding in each state. This can be avoided with a living trust.
Another advantage of a living trust is that it allows you to appoint a trustee who will handle your business and financial affairs in the event you are incapacitated during your lifetime. A will, on the other hand, only takes effect on your death, and cannot be used for this purpose.
Powers of Attorney.
All competent adults in Wisconsin should have a health care power of attorney, designating someone to make their health care decisions in the event they are unable to do so for themselves.
A power of attorney for finances (not to be confused with the health care power of attorney) allows you to appoint someone to handle your financial affairs during your lifetime if you are unable to do so yourself.
Living Wills.
You may have heard of the “living will,” which is very different from the “living trust” discussed above. A “living will,” also known as the “Declaration to Physicians,” allows adults in Wisconsin to state their preferences for life-sustaining procedures and feeding tubes in the event the person is in a terminal condition or persistent vegetative state.
Estate Taxes.
The issue of estate taxes has disappeared from the radar screen of many people. Wisconsin has not had a state inheritance tax or an estate tax for several years. The federal estate tax exclusion amount for persons dying during 2012 is $5,120,000. However, the federal exclusion amount is scheduled to return to the previous level of $1,000,000 for persons dying on or after January 1, 2013. There is speculation that Congress will act to retain either a $3,500,000 or $5,000,000 exclusion, but in our present fiscal and political climate, it is anybody’s guess as to what will happen. Well drafted estate planning documents should plan for the possibility that the federal estate tax exclusion may return to the $1,000,000 exclusion level.
Special Circumstances.
Many business owners have some special circumstances which must be accommodated in order to meet their need and intentions in their estate plan. Examples include children who have special needs or who receive governmental assistance, second and third marriages and children from prior marriages. The family and financial situation of the client must be considered carefully before making decisions as to what type of estate plan is appropriate.
Estate planning for business owners does not need to be complicated or expensive. The important thing is to understand your options and adopt and implement a plan which is appropriate for your particular situation.