Entrepreneurs and founders are often faced with the challenge of transferring their enterprise interests to an estate. A licensed estate planner is an attorney, who will assist a client make the important decisions about protecting those assets, including intellectual property assets such as trademarks from loss after death. Estate planners recommend a three (3) part planning process: Part 1: Estate Planning; Part 2: Business Continuity and Financial Planning; and Part 3: Advanced Wealth and Estate Transfer. In this article, we focus on Part 1: Estate Planning to examine the benefits of integrating estate formation as part of business strategy.
Estate Planning is Never Too Soon
When an entrepreneur or founder builds a business, they are working towards a venture that will hopefully pay off in the future. Once realized, the value of a business can be transferred to a personal estate. Entrepreneurs and founders have unique financial planning needs in that they must be proactive about estate planning early in the company formation process. Most owners are prompted by the benefits of federal Internal Revenue Service (“IRS”) tax-exemption for gifts and estates which allow an executive officer to maximize their liquidity options while still living. Even basic estate planning will educate an entrepreneur or business owner about the financial planning, asset protection, and tax-exemption available to them before retirement in their later years.
On completion of estate planning, an estate holder has established a tax-efficient will, last testamentary documents, and other provisions for transfer of assets to an estate with instructions for distribution to named heirs and beneficiaries once they pass. Some estate holders can request formation of a revocable trust to ensure that assets can be transferred out of an estate during their life should they choose. Appointment of a Trustee or “power of attorney” names a fiduciary for purposes of estate administration. A personal representative can also be appointed to protect an estate from any risk associated with a decedent’s last wishes during the administration process.
How Estate Law Affects Strategy
Business strategy can be improved by estate planning if assets will be transferred to an owner’s estate or trust before their death. A written will and revocable trust reduces the risk of federal and state estate taxation of inheritors. Under current federal law, individuals are entitled to estate tax-exemption of $11,180,000. Assets reported to the IRS are currently assessed at a tax rate of 40 percent excess of federal exemption. The apportioned tax rate is reduced by taxable gifts made during the life of an estate holder. In 2017, New York Department of Taxation and Finance raised the tax-exempt ceiling on estate assets to $5.25 million.
Finally, estate planning is important for documentation of any instructions related to incapacity planning to protect business assets should an owner become unable to function physically or mentally before their death. Incapacity planning eliminates the hassle of due process associated with court appointment of a guardian or conservator to manage a business owner’s financial and healthcare interests. A health care proxy written into estate documentation gives instructions for power of attorney by a fiduciary or personal representative in the event of an estate holder’s incapacity.
Contact a licensed estate planning attorney to find out about the estate planning process.
Estate Law Attorney Practice
Ettinger Law Firm is a licensed New York attorney practice specializing in estate planning and probate litigation. Contact Ettinger Law Firm to schedule an estate planning consultation.