5 Reasons Every Business Owners Needs a Living Trust

If you are like me the last thing you want to do is take time away from working on your business to meet with advisors about what could happen in the future. As a business owner, I have found there are usually two types of drivers for the decisions I make. Will this decision result in more revenue or profit for my business or will this decision help me or my business avoid a negative outcome. The decision of creating a Living Trust falls into the second category as it will not create more income or profit. It will however help your loved ones avoid some major pain. I want to focus on five reasons business owners should have a living trust in the estate and business succession plan.

What are those pitfalls?
1. If you don't have a living trust, your family will have to go through the process of either probating your will or an intestate (no will) administration. Both of these processes take time and no one will have any authority to run your business until they get appointed by a probate judge. This can take from 6 weeks to 6 months depending on the court's docket. Even 6 weeks without the ability to move funds around could spell disaster for your business. These processes also cost on average between $3,000 and $7,000 depending upon the path and complexity of your estate. Your loved ones could be frozen out of the business and forced to use their personal funds to pay for this process.

2. If you don't have a living trust and have assets in multiple states, your family could be forced to go through probate in multiple states in order to transfer the title of the assets to the appropriate person. Every state has different probate schemes and your loved ones would have to deal with lawyers in each state. This could all be avoided by placing all your assets into a living trust.

3. If you don't have a living trust and use a last will and testament to communicate your wishes how your business should be dealt with after your death, it will subject to a will contest. While it is possible to contest a trust, it is much more difficult.

4. If you don't have a trust and your family inherits assets that are subject to capital gains taxes, they will take your basis. What does that really mean. Well, if you give your hairy unwashed heirs a house that you bought for $100k through a will and they sell it or $300K, they will pay capital gains on $200K. However, if they receive the same house through a Living Trust, they get to step up to the value on the date of your death say $300K and pay no capital gains.

5. If you don't have a trust, a beneficiary who should never be handed a business to operate or could end up with your business. Having a living trust allows you to give the business or business assets to your chosen beneficiaries at the time and circumstances of your choosing.

There are many other reasons business owners should consider putting a living trust in place. If you want to hear them, book a free Peace of Mind Strategy Session and we will show you.