According to one financial expert, the estate plans of business owners should have three distinct objectives. These include succession plans that let businesses transfer to new owners and help their original owners retain control via stock. Estate master plans should also incorporate retirement arrangements that let people and their spouses keep up their preferred lifestyles for as long as necessary and lifetime plans that transfer wealth while its owners are alive without sacrificing their control over the property.
In one example, a man who died left behind a $10.3 million C corporation overseen by one of his grown children. The home he and his surviving wife owned was worth $800,000, and the pair held other personal assets whose value totaled more than $1.7 million. While the man created an estate plan that helped minimize taxes at the time of his death and provided sufficient second-to-die insurance to continue the estate when his wife died, he overlooked one key issue.
After her husband’s death, the wife lacked the cash flow to continue living at the means she was accustomed to. She eventually had to change the corporation’s status to an S corporation and draw income from the its profits, which she was able to do as a 10 percent owner.
Different estate plans are associated with unique tax obligations. Each arrangement also grants beneficiaries different rights and obligations. Those who wish to have their wealth pass on in a specific fashion must choose an estate planning strategy that actually supports their intentions. Changing laws and asset markets make the assistance of an estate tax planning attorney advisable.