It is extremely important for business owners to have a will and a trust in order to avoid probate.  Probate is the court process that is used to notify heirs and creditors of their rights after a person dies.  The beneficiaries do not receive the assets of the estate until all fees and expenses of the decedent have been paid.  Probate is usually much more expensive and time consuming than taking preventative legal measures ahead of time.

Avoiding probate will help ensure that the business can be maintained.  While the business may be sold when the owner passes away or becomes disabled, it is important to maintain the goodwill of the business or its value may substantially decrease.  A trust can be used to make funds available immediately and a successor trustee can continue to run the business if the original owner is unable to do so.

Even if there is a buy-sell or cross purchase agreement in place, it is possible that there may not be enough liquid assets or insurance to buy out a deceased or disabled owner.  When this occurs, the interest in the business that cannot be bought out may force the business to be sold or closed.

Another matter to consider is that if a business owner provides substantial support for his or her family assets should be available quickly.  There may be outstanding medical bills and funeral expenses.  Avoiding probate will allow the beneficiaries of the estate to receive some or all of the assets without resorting to the delays and expenses of the probate process.

ACT QUICKLY

When someone close to you dies it can be a traumatic experience, but it is extremely important to act immediately and contact an attorney.  A lawyer who concentrates in probate and estate administration can advise you on how to protect assets from damage, loss, and theft.  Unfortunately, assets are often stolen by friends, family members or strangers immediately following a person’s death. Basically, more things often go wrong when you do not act quickly.

PROBATE

Probate is the court process that is usually required when someone dies if he or she owned more than $100,000 and/or owned any real estate.  If the deceased individual had a valid will it must be filed with the appropriate court.   An individual (executor or administrator) is usually appointed by the court to be responsible for gathering the deceased individual’s possessions and outstanding liabilities.  This process exists to ensure that creditors of the estate are paid and the beneficiaries of the estate receive the money, real estate and other assets.

ESTATE ADMINISTRATION

If the deceased individual had a properly funded trust and/or all assets listed named beneficiaries, it may be possible to avoid probate. While estate administration is often a more streamlined process than probate, creditors of the estate are required to be paid, the title to real estate should be transferred, insurance policies need to be updated and final tax returns must be filed. It is extremely important that an estate is managed correctly so everyone is aware of his or her rights and responsibilities.  A lawyer who is experienced in estate administration and probate can efficiently guide family and friends through this process.

Everyone who is an owner of a business should have a plan to determine what will happen if he or she is unable or unwilling to manage the company.  If there is a single owner who runs the business, ownership can be transferred to a family member or it can be sold.

If there is more than one owner of a company, everyone must consider how to buy out the other owners in the event of disability or death.  Ideally, the business owners would have a buy-sell agreement implemented while all of the owners are younger and in good health so their ownership interest can be bought out by using life insurance and/or disability insurance.

However, if insurance is not a practical option, a buy-sell agreement may require the deceased or disabled ownership interest to be purchased over time.  An appraisal on the date of death/disability of an owner, or an evaluation based on past and/or future earnings are the most common ways of determining a business’s value.

Restricting the sale of an ownership interest to an outside third party is an option to be considered as well.  When a business owner wishes to sell his or her ownership interest, he or she can be required to obtain a verified offer and the other business owners would have the first opportunity to buy that interest under the same terms and conditions.  It may also be desirable to require a buyout in the event someone wishes to leave the business as it may be extremely difficult to find a purchaser.

Many people have existing wills and trusts which they have not updated for a long time. However, it is imperative to review an estate plan periodically to ensure that it is still appropriate.

The laws periodically change as do the personal situations of every individual.  For example, powers of attorney for healthcare and property were amended on July 1, 2012 by the Illinois General Assembly.  These documents should be revised to reflect the recent changes in the law.

Some personal situations where an estate plan should be updated include, but are not limited to the following: after moving to a new home, after the birth, death, or adoption of a child, after the death of a spouse or beneficiary, after a marriage, after a divorce, prior to surgery, after the diagnosis of a serious illness or after a great increase or decrease in one’s financial circumstances.

The age or health of a beneficiary may also warrant updating your documents.  For example, if you are leaving your estate to minor children, you may not want them to receive all of your assets at once.  Also, if you are leaving assets to a disabled beneficiary, great caution must be exercised to ensure government benefits are not terminated as the result of an inheritance.

It is extremely important to retain an attorney who concentrates in estate planning.  An estate plan should be customized to an individual’s circumstances and goals.  Unfortunately, many wills and trusts are written by attorneys who have an inadequate understanding of this area of law.  The consequence of having poorly drafted or obsolete documents can be devestating to clients and their beneficiaries.  Therefore, estate planning documents need to be reviewed on a regular basis.

Many people often wonder if they need a trust or if a simple will is sufficient for their purposes. A living revocable trust can be extremely beneficial to many people if it is used properly and is drafted by someone who focuses on this area of law.  The most common reason for using this type of trust is to avoid probate.  Upon someone’s death probate is often required if the person who died had real estate in his or her own name and/or assets in excess of $100,000.  The expense and the time it takes to go through the probate process can be avoided.

In addition to avoiding probate, a properly drafted and utilized living revocable trust can be beneficial to someone who cannot, or who does not want to, make financial decisions.  Another person, bank, or trust company can be named to make these decisions.  A living revocable trust can also be used to give someone a stream of income without giving them control of the assets; this is extremely important if you have minor children or if you would be giving your assets to someone who is not accustomed to handling finances.

While there are numerous benefits to using a revocable living trust, assets need to be renamed in the name of the trust for it to be effective.  For example, if John Smith has a house in his own name, and he subsequently executes a living revocable trust, a new deed should be recorded to show the trust owns the home.  Probate would necessary if a new deed was not recorded and unfortunately many people are shocked to learn their homes were never transferred into their trusts! Once a home is transferred to a person’s trust, it is often necessary to notify your insurance agency to properly maintain coverage.

* Please note that this article is for educational purposes only and may be considered advertising material. This article is not legal advice. You should consult an attorney regarding any legal matters.

Powers of attorney for healthcare and property are some of the most important legal documents you can have to protect your interests. They are used to designate someone (an agent) to make decisions for you in the event you cannot make decisions regarding your own healthcare or finances. If you become disabled and you have not executed powers of attorney, the court must appoint someone (a guardian) to make these decisions on your behalf.

The appointed guardian is not necessarily your spouse, parent, child, sibling or friend. When a guardian is appointed, annual accountings must be filed with the court. Guardianship proceedings are often extremely burdensome from both the financial and the emotional perspective. Litigation arising from both physical and financial abuse in this area of law has significantly increased in recent years. Therefore, if you do not have a power of attorney for healthcare and a power of attorney for property, it is extremely important that you execute them immediately.

On July 1, 2011 powers of attorney for healthcare and property were updated in Illinois. Powers of attorney for healthcare executed prior to July 1, 2011 do not contain Health Insurance Portability and Accountability Act of 1996 (HIPAA) language, which is necessary under federal law to obtain private health data. Consequently, individuals acting as agents under an outdated power of attorney for healthcare may not be able to obtain your medical records.

The recent updates to powers of attorney for property mandate that an agent keep complete records of all financial transactions that occur while he or she is acting on your behalf. Also, some banks and financial institutions may not accept an outdated power of attorney for property or it may take much longer to obtain funds.

It is vital that powers of attorney and other estate planning documents (such as wills, trusts, and living wills) are periodically updated to ensure that they effectively reflect changes to both the law and an individual’s personal situation. Improper alterations to these documents (removing names, inserting names or changing the amount of money a beneficiary will receive, etc) are not recognized by the courts, healthcare institutions or financial institutions. Therefore, it is imperative that your estate planning is periodically reviewed and updated by an attorney who concentrates in this area of law.

Do you need a will or a trust? If you do not have a will and trust or have not updated your documents recently you need to consult with an attorney who concentrates in estate planning. Wills and trusts should be reviewed often as laws and personal situations change. It is advantageous to reassess estate planning documents to ensure your goals are achieved. While most people believe a simple will is all that is necessary, a living trust is usually more beneficial.

A living trust that has been properly executed can be used to avoid probate and guardianship proceedings. Probate is a court procedure which is used to transfer assets and pay creditors when someone passes away. Guardianship proceedings occur when someone is unable to make financial or healthcare decisions and a judge must decide who should make decisions for that person. Both of these processes are very time consuming, expensive and often result in litigation.

The most common problems with wills and trusts occur when attorneys who do not concentrate in estate planning draft them or when someone uses an online will or trust. Wills and trusts executed improperly often cause many predicaments.

A lawyer who is well versed in estate planning can customize wills and trusts to fit your individual needs. It is important that the attorney drafting your will and trust has a clear understanding of your assets and who is entitled to them. You should immediately contact an estate planning attorney to update your will and trust if a major event has occurred such as the death of a spouse or child, marriage, divorce or if you have moved to a new home. These events can have a great impact on your overall estate plan and should be carefully considered.

* Please note that this article is for educational purposes only and may be considered advertising material. This article is not legal advice. You should consult an attorney regarding any legal matters.

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