You may have set up a trust to protect your estate from probate but what have you done to ensure your business avoids probate? Your business capital, equipment and building or other assets you have acquired to build your successful business may be subject to probate if you haven’t taken steps to plan ahead. Just like your personal assets, your business assets may also be given to your family after your death. As a sole proprietor, there are certain steps you can take to protect your business from probate. Establishing a business succession plan ahead of time will be very helpful for your family when the time comes.
As a sole proprietor, there are certain actions you can take to protect your business from probate.
Think about what could happen if you don’t have a will. Just like your personal assets, your business assets may also be given to your family. This might not be a problem if your family knows how to run your business. But what if they don’t know anything about how to keep your business running smoothly?
Based on everything that I have read, legal authorities and attorneys are saying that everyone should have a living trust because it is really a contract where you can tell others what should happen to your business property upon your death. Both personal and business property can avoid probate, if properly set up before you die.
As business owners, we have all entered into contracts for our employees, vendors, and others to put agreements in writing. So, wouldn’t it make sense to also have a contract in place that dictates who will receive your business assets when you pass away? When you think about it, it’s just one more contract that will protect your business from probate. On a personal level, we have also entered into contracts, which are agreements of performance by two or more entities. Below are a few examples.
Examples of contracts we enter into for personal reasons:
If you don’t deal with your assets (taking care of things by contract), then the law and the courts provide for you. When we place real and personal property into a trust, we can now name who shall receive the property when we die. This contract is called a Living Trust. If property is not in the trust, it may go through probate, which is where a judge decides who gets your property and requires a long formal court proceeding before your property may be given to your loved ones.
You should always keep your business growth in mind when updating your trust. Changing from a sole-proprietor to a corporation or partnership, will affect how you distribute your assets to your heirs. Read my article on how to Protect your Corporation from Probate which provides several options for your business to avoid probate in the event of your death.
Going through probate is an exhaustive and costly experience for your family. If you miss a court deadline even by one day, it can delay the final outcome by months, reducing one to tears. But, this can all be avoided with a properly funded trust and smart business planning through your business contracts.
Probate only happens to people who don’t plan ahead. Are you prepared?