If you’re an entrepreneur, or a small or family business owner, you have more to lose if you don’t have an estate plan. An estate plan help you protect not only your family and your assets, but also the business you’ve spent years (or decades) building. A recent article at Entrepreneur.com, entitled What Entrepreneurs Should Know About Estate Planning, describes some of the main components of an estate plan and how they can be useful to a business owner.

That article covers eight estate planning components, beginning with a will and a living trust and ending with long term care insurance and disability insurance. All of these components are extremely useful (and in some cases absolutely necessary) and we highly recommend reading through the entire article. We would also suggest that there are three more documents that an entrepreneur should consider to help preserve business and wealth for future generations.

Family Limited Partnership (FLP): A Family Limited Partnership is an asset protection tool which allows parents to take business assets out of their taxable estate and transfer the value of that asset to their children while still remaining in control of the business.

Buy-Sell Agreement: A buy-sell agreement is a formal plan or contract between business partners establishing what will happen to the business should one of the partners die. This document specifies whether a partner may or may not buy your ownership shares for your heirs and for what price, or if you want to block certain family members or individuals from having any ownership share in the business.

Succession Plan: A succession plan should be a key element in any business plan, but especially for small or family businesses. A succession plan is exactly what it sounds like, a formal plan outlining your wishes for passing your business on to your successors. You may design a succession plan to facilitate your retirement, or to provide a smooth transition in the event of your death. In any case, a succession plan is essential for any business owner.

Don’t leave your business—or your family—out in the cold. Take the necessary steps to protect them both in the event of your death with a well-designed estate plan.

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There is good news today for senior citizens! According to this article in CNN Money, “Social Security recipients will receive a cost of living adjustment of 3.6% starting in January.” This will be the first “raise” recipients have seen in three years, and most welcome the increase. “Many seniors have felt squeezed since banks are paying virtually no interest on savings accounts and stock market declines has eroded their retirement accounts.”

Unfortunately, many seniors may not see a useful increase in their social security income thanks to a hike in Medicare premiums expected to be announced next month. “For the past two years when Social Security benefits stayed the same, many seniors were shielded from the increase in Medicare premiums because of a “hold harmless” provision that protects more than 70% of beneficiaries… However, high-income beneficiaries and new enrollees did see their benefits reduced because they are not covered under the provision.”

Even with the expected increase to Medicare premiums, most seniors are simply glad to see evidence that The-Powers-That-Be recognize the rising cost of living. While most recipients of Social Security do have an alternate form of income, with their SS benefits representing “about 41% of the elderly’s income”; there are some who “rely on the monthly checks for 90% of their income.”

For more complete information about the coming changes in Social Security please read the full article. For help understanding how this change may fit in with your other benefits, or may affect your estate planning, please contact our office.

The recent death of creative visionary and Apple co-founder Steve Jobs saddened the world. News of his death traveled like wildfire, and had the online social networks humming with tributes, memorial posts, and sentiments of grief. Mr. Jobs was very private about his personal life, but through his public appearances and his support of various creative enterprises he touched and changed the lives of many individuals; just as his visionary ideas changed the face of technology.

The sad announcement of his death has many people now wondering “what next?” How will this change the company he started? What will happen with his family? As this article from ABC News relates, “The ever-private Steve Jobs was famously secretive when it came to Apple’s new products. As with his personal life, the future of Steve Jobs’ wealth [and family] will also stay under the radar.”

The article mentioned above states that “Given Jobs’ vast wealth and penchant for privacy, he likely set up private trusts for his family and charitable purposes.” Private trusts would certainly have been the logical thing to do, under the circumstances. Trusts are a much more flexible, powerful, and private tool than a simple will when it comes to estate planning. Trusts are useful under any circumstances, but they provide a much greater amount of control and protection of assets, especially when dealing with very large estates.

If Steve Jobs did choose to create trusts to protect his estate then it is possible that we may never truly know how he chose to distribute his wealth. It is probably safe to assume, however, that in addition to providing for his family and loved ones, he may have left a considerable amount to charitable or visionary endeavors. His words and actions during life provide a clue about how he thought about wealth: “Being the richest man in the cemetery doesn’t matter to me…Going to bed at night saying we’ve done something wonderful…that’s what matters to me.”

Every parent wants to be fair to their children; avoid showing favoritism, give each the same advantages, and eventually leaving each a fair and equal inheritance. But every parent also knows that there are times when equal is not always fair—a dilemma that is often faced by parents drawing up their will or estate plan. This is exactly the issue that is addressed in this recent article in the Wall Street Journal entitled Wills: How to Give One Child Less.

The article mentions that there are a number of different reasons why parents may want to give seemingly unequal financial distributions in their wills, “Many parents want to support children who need more financial help, while others want to repay children who have provided important support or caregiving. Some parents already may have helped one child considerably more than another during his or her lifetime, such as paying for a pricey graduate-school education or providing money for a down payment for a house. Other parents are reluctant to reward a particularly difficult or problematic child.”

There is absolutely nothing wrong with choosing to leave more to one child than another, but problems may arise when children are caught by surprise and feel neglected or betrayed; this happens most often when children don’t understand the reasons for their parents’ seeming favoritism, and can result in one child choosing to contest your will in court.

The WSJ article recommends a few strategies to avoid these hurt feelings and expensive court proceedings, but the first and best strategy is to talk to your children about it ahead of time, if possible. Hearing the news (and the reasons behind it) from mom and dad themselves can be much less hurtful than hearing about it from an attorney. Furthermore, telling your children yourself gives you the opportunity to explain your decision in a sensitive and loving manner.

If you still worry that your decision might be contested there are a number of precautions you can take to help ensure your planning documents will hold, including taking steps to prove your mental capacity is sound, creating what the WSJ calls “serial wills,” including a no-contest clause in your will, and more. Which method you may choose to employ will depend completely on your unique situation, and your estate planning attorney will be able to help you decide which is best.

We all know logically that “equal” is not always “fair,” but the heart does not always understand what seems logical to the head. Breaking the news gently to your kids ahead of time can go a long way toward avoiding hurt feelings later.