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INTEGRATING THE BUSINESS IN THE ESTATE PLAN

After establishing your six basic estate planning documents (Living Trust, Pour-over Will, Health Care Power of Attorney, Living Will, Durable Power of Attorney, Asset Transfer), the next step is to incorporate them into a plan that will work to the advantage of your business.

There are four areas that must be addressed in this process:

  • Transfer of Ownership Interests
  • Management Issues
  • Assets Ancillary to the Business
  • Business Formalities of Trust Ownership

TRANSFER OF OWNERSHIP INTERESTS
When transferring ownership interests in your business, you must make sure that those interests are legally transferrable and do not violate any business agreements previously made.

If you are the co-owner of a business, you must determine whether the consent of your partner or partners is needed for the transfer. Additionally, you must make sure that your transfer does not violate bank covenants or vendor agreements to which your business is a party.

The final step is to confirm that your intended transfer of ownership complies with the terms of any shareholder agreements your company has made.

MANAGEMENT ISSUES
Before making any transfer of ownership interest, explain to your current management why the transition is being made and that the company remains stable and healthy. It is important that the transfer will not adversely affect the current management structure, and that management knows, in advance, of any changes that the transfer will cause.

ASSETS ANCILLARY TO THE BUSINESS
There are several choices available for transferring your business’ ancillary assets. One option is to consider transferring business real estate and other fixed assets into a separate LLC, which would be owned by your living trust. You may also consider alternative ownership for assets such as patents and additional intellectual property.

BUSINESS FORMALITIES OF TRUST OWNERSHIP
Basic formalities must be followed as the owner of a trust. These include confirmation that company resolutions are signed as “trustee” of your trust, and insuring that bank guarantees are provided to you in trust capacity (and individual capacity, if needed).

If your business requires any professional licensing, verify that the transfer complies with the license requirements and make sure that business tax returns reflect the trust as the owner of this interest.

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