E23: Season 3 Episode 3: Estate Planning
What Is Probate And How To Deal With It?
Probate is what happens when someone passes away unexpectedly or just hasn’t planned for their death at all. You typically see this in scenarios where people die much younger than expected. Probate means you are under jurisdiction of the court, which can become pretty costly and time consuming. A simple way to avoid this is obviously planning for your death, or having a living trust. Probate is generally something you want to avoid.
Simplifying Estate Taxes
Estate taxes are due nine months from the day of the death. Like other taxes, you can get an extension on these taxes, but you will have to pay interest on this extension. Depending on the family structure, if you haven’t planned for death, the state will divide up the funds due to their guidelines. A new form has been added into the mix with estate taxes, the 1099-A, but it can be hard to qualify for the exemptions and deductions the form provides.
The 1202 And How It Works
To be eligible for the 1202 deduction you must meet certain factors, but if you meet these factors this can work wonders for you financially. You must own stock in a C corporation, and it must be a United Sates based corporation. You must own this stock for a minimum of 5 years and it has to have been purchased for the original price. If you meet these requirements this grants you the ability to take a $10 million tax deduction for capital gains.
Valuable Law Advice To Business Owners
So many business owners have no plan to pay their estate tax. As a business owner if all the money is coming from the business, there must be a plan. Whether that means gifting out some shares of the business, there has to be some plan in motion. Having a plan for this situation will be very helpful to those you leave your assets to.
The Family Factor
Unfortunately, when there is a death in the family and money is involved, things can get nasty. There may be situation where siblings don’t get along, or there has been a divorce and the current spouse gets everything. These situations compounded with the death can be a very uncomfortable time. Feelings can get hurt, and money can be lost during these fights. Not only money should be planned for, also plan for your business, your properties, your jewelry, your family heirlooms, anything that could possibly come up after your death. Thoroughly planning your estate and speaking with your family about this can alleviate a lot of these horrible situations.
The Big Takeaways
Early planning is pivotal; assign your business to the trust to avoid probate. Another point, if you’re in a business partnership and have a buy-sell agreement don’t let be locked into a certain price, there should be some market valuation taking place. It shouldn’t be assumed that leaving a business to your children means they want to continue on the career path you were. Again, on the subject of the children, don’t assume that they are going to get along and be able to calmly workout your will, plan for every detail you can to avoid these conflicts.
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