J. Kelly Kennedy, Attorney/CPA, PLLC

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Estate administration for business owners

Some Polk County residents may have experience dealing with the probate process. When a person dies, the probate court oversees the distribution of assets from the person's estate. The court also disposes of any disputes between heirs regarding the validity of any provisions of the deceased's will.

Because probate can be expensive and contentious, some people choose to plan their estate so that their assets pass to their heirs as smoothly as possible. In some cases, the person may have a plan to pass on their assets without involving the probate court. While this can be fairly easy to achieve for assets like real estate or investment accounts, it can be trickier when it comes to an estate administration plan for a person's business.

One method of dealing with this issue is for the person who owns the business to set up a trust for the company's assets. Through a living trust, the owner can continue to manage the business while they are alive, but upon their death, it will pass to the decedent's heirs without first having to go through probate.

Trusts can be very useful in passing a business down from one person to his or her heirs, but sometimes trusts cannot cover all of the business's assets. In these situations, the owner should spell out the exact process of how the business will run during the probate process. This means assigning appropriate management responsibilities for successors to oversee the business. Also, the owner should make plans for how the business will continue to generate cash flow and provide income for beneficiaries.

Planning the transfer of a business after the owner's death can be more complex than just planning the transfer of the personal estate. One of the most important aspects is for the owner to fully think through how the business will continue its daily operations after he or she passes away. An estate planning attorney may be able to help business owners think through all aspects of transferring the business, and how to avoid common legal issues in the process.

Source: Forbes, "Five Ways Business Owners Can Avoid Probate Problems," Steve Parrish, May 4, 2015

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