Typically, a revocable trust is not an asset protection trust. In order to set up a revocable trust, we use one of the trustor’s social security numbers, so it is not meant to be an asset protection vehicle. However, there are other types of trusts that can be created for that purpose, subject to the limitations that I talked about before: that is, the trust cannot be created to avoid any existing debtors or litigation, or to create a shield in between the beneficiary or creator of the trust and any potential liability, for business or otherwise.
In these cases, we usually dovetail both of the business documents, including a buy-sell agreement or succession plan, into the estate plan. That way, we’re planning for all contingencies down the road, in an effort to prevent creditors from penetrating the business or the estate for debts.
What Should Be Involved In The Succession Planning Of My Business If I Plan To Leave My Company To My Heirs After My Death?
The most important part of creating a plan like this is time. You should leave as much time as you possibly can for the plan to be created before your retirement. Specifically, we usually need at least 36 months before your retirement—and ideally, closer to 50 or 60 months before your retirement—in order to successfully plot and execute such a plan. This is true whether you’re planning on retiring and giving your company to your children or whether you have a health issue and are stepping down because you cannot continue.
So, we need to have a comprehensive succession plan in place from a business point of view to increase the chances of your business succeeding. This should include the proper transfers of shares to your heirs and an estate plan that allows for the proper transition of the business to your children.
Can I Create A Buy-Sell Agreement For My Company As Part Of My Estate Planning Documents?
A buy-sell agreement is basically an opportunity for the existing owners of a company to give their ownership up to either:
- Heirs; or,
- Shareholders or owners of the company that may not be related to them.
Typically, we dovetail the buy-sell plan and the succession planning into the estate plan, so that everybody knows in advance where those shares are going to go. Sometimes owners want to give some of their company to their employees. We can also include a provision to those ends in the buy-sell plan as part of their estate plan.
For more information on Business Succession Planning In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (949) 287-5558 today.