People who run successful professional practices or small businesses have more reason than most people to draft estate plans. They need to take appropriate steps to protect not just their loved ones but also the businesses that they created.
Those concerned about the future of the company that they operate, in addition to the investment it represents, may want to consider establishing a trust to hold and manage the business. Doing so could allow for a smoother transition when an owner dies or becomes incapacitated.
How does a business trust help?
Traditional estate planning tactics can fall short of meeting the needs of business owners. For example, simply bequeathing a business or professional practice to a loved one might lead to a host of complications. They may not gain control until the completion of the probate process, at which point the company may have already been struggling.
There is also nothing preventing a beneficiary from selling the company or even liquidating its assets for short-term profit. A business trust provides more structure and control. The trustee can manage business operations without waiting for the completion of probate proceedings.
It is possible for the trustor to choose a trustee who can competently manage the business and name beneficiaries to receive profits from successful operations. A trust may allow for the long-term preservation of the business while still ensuring that certain people benefit from its continued operations.
Transferring ownership of a business to a trust can be a complex process. Creating effective trust documents often requires the support of a legal professional. Business owners concerned about protecting their business, not just ensuring the inheritance rights of immediate family members, may want to look into many options for integrating the company into their estate plan, including the creation of a trust.