A Business Plan for Your Family

by Gerald Gorman

It’s the vogue these days for every business to have a business plan. However, we often don’t give much thought to such a plan for that business which, for most of us, is nearest and dearest: our family.

Wills and trusts are the basic tools for a business plan for your family. With such tools you can provide for your family’s care when you are no longer around.

Who needs a will? Frequently this question is answered, Everybody, but that is not quite true. If you are single, with no surviving parent, child or other being or entity of some significance to you, and don’t care what happens to your assets after you die, then why waste money on a will?

More seriously, if you are married with no children, or single with an only child, and if you want your spouse or child to succeed to all your assets, then putting all your assets into joint names may be wholly sufficient. However, joint ownership can create problems. Once you add someone to your title, you can no longer deal unilaterally with that property.

Most of us do not fit these narrow descriptions. But those who don’t, probably need a will. Indeed you, gentle reader, probably need one too.

What should a will say? A meaningful answer is impossible here. A will should meet the circumstances of the family for which it is drawn. Therefore wills’ contents vary as widely as do the circumstances of each family. This is why you should not draft your own from a book. You need to explain to your attorney your particular circumstances. Then your will can be drafted to do what you want.

But doesn’t a will make your estate go through— gasp!—probate? Actually, it’s not the will that makes you go through probate. It’s owning something in your sole name at your death. To avoid probate, you must not die while you own anything.

There are several ways to avoid probate, but most of them have some drawbacks.

One of the less desirable options is never to accumulate anything. Hubert Rowlands, a late and lamented law partner of mine, described his favorite will as a one-liner: “Being sound of mind and body, I spent everything I had.” But in practice it is almost impossible to come out even.

A more common method is titling all one’s assets jointly or in some type of survivorship title. This may require giving up the sole right to manage property so titled. However there are some types of “transfer on death” registrations which can be useful, especially in small estates. Unfortunately such titles seem often to be suggested by well-meaning bank clerks or securities salesmen, and accordingly are frequently misused.

Probably the most sophisticated method for avoiding probate is a trust. Trusts, too, are frequently improperly promoted, and do have some disadvantages, especially where the purpose of a given trust is solely to avoid probate. However where there is an independent purpose for a trust, the trust will offer the side advantage of avoiding probate for property which is in it.

In proper circumstances, trusts are marvelous tools. They can be used to accomplish almost anything. They can be created to do things during your life. Or they can be included in your will, to take effect only at your death (though this type of trust will not avoid probate, as the will must be probated to create the trust).

Because trusts, like wills, can do almost any-thing, one can only hint here at what they might do for you. Do you need to provide your surviving spouse with management for investment assets? Do you have a child who might not responsibly use assets left to the child outright?

Especially important to many, do you want to save estate taxes? Trusts can often provide startling tax savings where circumstances fit.

Probably almost every reader of this magazine could use a trust as a part of his or her estate plan. But the key, as with wills, is to be sure circumstances fit. Unless you are an attorney versed in estate matters, you should consult one who is.

The main point is, if you don’t prepare something, you will be leaving your family with no business plan for when you’re gone.

 

Gerald W. Gorman is Principal at Slagle, Bernard & Gorman, P.C.
P     |     816.410.4604
E     |     GGorman@sbg-law.com