When it comes time to put wealth and property into a legally binding will, some things are easier than others. You generally leave cash, physical assets and life insurance to help meet the financial needs of a spouse and children. But a business with many moving parts can be more complicated. Not every heir has the experience to operate a company.
Without specific instructions about what happens to your business, those decisions could end up in the hands of a Florida probate court. It’s important to work with an experienced attorney to create a will that fulfills your wishes and directs assets in a successful fashion.
What Happens Without a Will?
In Florida, when someone passes without a will or they don’t list certain assets, a probate judge will likely make the decision for you. Under a rule commonly known as “intestate succession,” spousal and children’s rights are primary. If your children are from the same marriage, the spouse inherits 100 percent. If they are from another union, 50 percent goes to the spouse, 50 percent to the children. After that, parents and then siblings receive assets. In the absence of relatives, the state will assume the estate. Being taxed your entire life only to have the state end up with the rest of your money is not a desirable outcome.
There are several ways that you can leave a business to loved ones. But you may want to consider the nature of the operation and future ownership. For example, family members may not have the experience to run a complicated manufacturing outfit or construction company. A person-centered company such as a consulting business or physician’s practice requires individualized knowledge and relationships. You need to ask yourself if your will supports long-term success for these heirs.
- Buy-Sell Agreement: If you have partners in the company, creating an agreement that gives them the opportunity to buy out your shares after death can ensure that loved ones receive the cash value. Designate who inherits the operation and include the buy-sell agreement. It’s generally a good idea to explain your wishes to avoid disagreements after you pass. This option can ensure the business’ legacy and provide wealth to loved ones.
- Executor Sale: Another option may be to have the will’s executor make a public sale at the time of your death. This option can be very effective for companies that have publicly traded stocks or are sought after by others familiar with the industry. Liquidating real estate assets at the time of your passing may also be a simpler path. The basic idea is that you will be providing a benefit without potential undue stress.
- Put Business in Trust: There are two types of trusts that are commonly used to manage assets such as businesses, revocable and irrevocable. Revocable trusts allow you the flexibility of moving assets in and out of the trust or terminating it altogether. In an irrevocable trust, whatever assets to place into it must remain there. By putting the business into trust, you’ll have the option of naming an executor to oversee its operations. The executor could handle management, taxes, distribution of profits and many other items. This can be a good option if your goal is to keep the company operational until an heir is old enough to take the reins. They would also see an ongoing benefit from company profits.
In terms of naming an executor for your will, an experienced attorney can handle the reading and distribution of assets. Being industry insiders to some degree, an attorney generally has the resources to facilitate your wishes. If you are leaving behind a functioning business, it’s important to have someone experienced with day-to-day operations and knowledge about the sector take the lead. Having two parties in charge of different assets is perfectly fine. You can even put a yearly review in place to be sure the business executor has done a reasonably good job of managing the company. Of course, everyone will need to be compensated for their work.
Once you have successfully drawn up a will, take the time to discuss the details with family members and loved ones. At the time of your passing, emotions are likely to run high and getting everyone on the same page can help deter hard feelings. Creating a will and making decisions about the future of a business is a powerful and loving message. Be sure it is heard.
If you are interested in creating a will or making changes to an existing one, contact an experienced law professional at France Law Firm, P.A. today.