Myths and Mistakes of Estate Planning for Business Owners
As business owners we have our hands full and can rarely spend the time to think far in the future, or to what we hope will be far in the future. Estate planning does not seem like an immediate need. Payroll, insurance renewals, a child's tuition, a nagging vendor...these and a million other pressing moments take the vast majority of our brain power and time from thinking and planning for the future, sometimes we hope, decades away.
Already many of you are thinking I have better things to do than read this blog. That's avoidance and procrastination seeping in. Today, and for the next three blogs I want to highlight some of the most common myths (not in any particular order), mistakes and assumptions around estate planning should you be brave enough to venture into this process. My goal is to help steer you past them, like a tour guide of unknown territory so that you have a better intended result
Myth: Estate planning is about taxes.
Yes, for a very rarefied few (less than 5000 people in 2011) who will owe the IRS lots in taxes at death, estate planning may be about taxes. For the rest of us, it is about legacy, family relationships and easing the burden to loved ones in difficult times. Health care proxies and living wills appoint someone to advocate for you in decisions about your body and can give clear direction about what should be done in critical times. Powers of attorney allow business and households to continue monetarily by allowing another trusted person to control cash flow and make financial decisions about assets in your name. Wills determine where unlabeled assets are distributed. Trusts allow for private settlement and care of assets to specific parties in a private manner as they avoid the probate process. Yes, several of these legal instruments can help mitigate a tax burden as well, but the majority of the value for us billionaire folk, is the ability to ease the decision making process at remarkably stressful and or life and death situations.
Mistake: Doing it alone.
Many things are OK to plan without your families awareness. Surprise parties, fabulous gifts and possibly vacations can all successfully done without your spouse's participation. Estate planning should not be done that way. In fact, if you have a contentious, even deceitful relatives, you should be as open as possible so that if a question does arise when you are least able to control the events (terminally ill, mentally incapacitated or dead), it is very clear and documented by witnesses what you intended to do with your assets. Nothing brings out the cat fights, and sometimes all out wars like a death in the family with goodies to be distributed.