Estate planning: so now what?

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Print this page Mark A. Jones, CPA, MST

Last week I found myself at my wife’s grandmother’s funeral. She was 101. As you can imagine, there were many nice things to say about someone who lived that long. I admired her in a lot of respects.

From time to time — and especially at funerals — I reflect on what my own will be like. How many people will be there? What will be said? What will go through my wife’s mind? What will my kids remember most about me? Invariably, though, my thoughts always turn to the interrelationship of my family and my businesses that I have operated over the last 30 years. In the days that follow my death, what happens to my family, my employees and the firm’s clients?

As a CPA in public practice over the last 30 years, I’ve had the opportunity to administer well thought-out estate plans compared to those I’d call a “cluster.” Here are some practical things to consider for your estate plan if you have a business. These thoughts are obviously not all-inclusive but should provoke thought. I’ll leave all the details for you to get straight with your trusted advisers.

Before we jump into it, what about you? Let’s say your funeral arrangements are being made right now. If you’re married, does your spouse have to be concerned about operating or transferring the business? Does your family have sufficient assets and income to continue their standard of living? Does your spouse have to work or take another job?  Can the kids go to college? There are lots of things to consider.

I think many business owners don’t prepare for succession for many reasons. They are busy with the day-to-day operations and tend to “live in the now.” Secondly, they have to identify a key employee, a competitor or a strategic buyer, which is not always easy. They also have to determine if they will fund this potential transfer with life insurance or disability insurance and go through the process of hammering out the details with a potential buyer and an attorney. With regular monthly bills rolling in, it’s hard to devote time to the details and funds for the life or disability insurance premiums. At a minimum, if planning the traditional way isn’t an option for you, at least write down a potential plan of action for your executor.

Many business owners will decide to have co-executors and co-trustees in their estate plans. This generally means the two must agree on every decision made. In most cases with co-executors, the decedent will chose a trusted advisor and a family friend. I have found myself in this situation many times.

Rethink this. This generally means you have one person that approaches the administration like a business, and one that doesn’t necessarily understand the fiduciary responsibilities. It also means that the two may split a fee when only one is doing the majority of the work. I don’t recommend family friends for this responsibility. I’d approach this as a business and have my friends console my family outside of those fiduciary responsibilities.

If you have a business that will take a great deal of administration, consider how your executor is going to be paid. Standard language such as “reasonable compensation” doesn’t address this. Imagine the difference in workload in dealing with a $5 million dollar business without a succession plan compared to a $5 million dollar brokerage account. I’ve seen wills that didn’t address this, and it tells me the decedent didn’t understand the ramifications of the language in the will — and possibly, neither did the drafting attorney. Discuss this issue with your executor when having your estate planning documents drafted.

How your assets are titled is important. From a probate standpoint, having the assets titled in the name of a trust reduces probate cost and eases the administration of the estate. Having bank accounts and investment accounts either in the name of the trust or simply having accounts as a transfer-on-death account (TOD) means those assets are immediately transferable and/or available. Review all your beneficiary designations on your retirement plans, insurance policies and annuities.
Some thought and some simple modifications to your estate planning documents can mean a lot to the loved ones you leave behind. It can also help your executor to sleep a little better. It may be time to rethink your planning.

Mark is the President and CEO of SIMA Financial Group, Inc.  He graduated from Virginia Tech in 1981.  He started the CPA firm in 1987 which is now known as SIMA Accounting Group LLC.  SIMA is a consolidated group of financial companies offering accounting, tax, Registered Investment Advisory services, HR/ benefits consulting and payroll processing services.  Mark is an active member in his church and is married with two children.

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