Do you own a small business? If so, estate planning can be particularly challenging because it must also include complex decisions and planning for your business. One underutilized legal tool that can help entrepreneurs and family businesses is a trust. How can these help you? Here are a few key ways.
1. Your Business Isn't Subject to Probate
One of the biggest advantages to using is that they avoid probate. Probate can be a long, expensive process wherein the court confirms your estate planning documents. Because it takes time, the business may be at risk of stagnating or deteriorating while sitting dormant. Decision-making is more laborious and the executor may not be the right person to be in charge of running the business. A trust helps keep the business free of all these entanglements.
2. You Name Trustees and Managers
When you craft a trust in advance, you can choose who will succeed you in running your enterprise. This gives you time to select just the right person, to work with them, and to prepare them to manage your business the way you want it done. You can also use the trust to name multiple managers — such as for different divisions — who report to the trustee and to define in writing how they will work together.
3. You Plan for Incapacitation
A will only plans what will happen to your business if you pass away. A trust can step into place if you're incapacitated or if you aren't available to make decisions for any other reason (such as travel). You don't have to make separate arrangements for one set of circumstances or another as the trust can do it all. This gives is more sweeping and relevant powers within your life.
4. Your Business Can Involve Others
Your trust must usually name either an outside beneficiary or an outside trustee, so it's a good way to involve heirs, partners, experts, and family members. If you want family members to take over the business, naming them as a backup or co-trustee gets them involved in running the business with less pressure than daily responsibilities. This provides a training ground for everyone.
5. You Can Alter Your Plans
Living trusts generally come in two varieties: revocable and irrevocable. A revocable trust can be altered by the grantor at any time so you don't lose control of your own business. You can make changes to your estate or succession plans without having to rewrite your entire plan.
Where to Learn More
Want to know more about how to use a trust to protect your business both now and in the future? Start by meeting with a professional who understands estate planning trusts in your state today.