Why You Should Make Estate Planning Part of Your Business Discussion

By Suzanne Jett Trowbridge
Of Counsel, Bernstein-Burkley, P.C.

While estate planning is not typically part of a business discussion, in the midst of the coronavirus pandemic and the concerns we all have, it’s an important topic to review or to take a first look at, a plan for the succession of your business and/or personal estate in the event of your death or even disability.

Medical Power of Attorney

As a threshold matter, a medical power of attorney and a living will are almost essential. In West Virginia, the approved form is a single document that appoints someone (your Medical Power of Attorney) to make medical decisions for you in the event of your incapacity, whether temporary or permanent. It also sets out your wishes as to various medical treatments that you may wish to have or to be withheld (your Living Will). Imagine being hospitalized and isolated without any family allowed with you. In this raging pandemic, doctors have expressed their despair about being unable to communicate with seriously ill patients as to what their treatment wishes are. An MPOA and Living Will gives your physician and family guidance as to treatment options you would want. They will know who in your family will speak for you, and your family will know how to speak for you.

Durable Power of Attorney

A Medical Power of Attorney authorizes a person to speak for you only as to medical matters in the event of your incapacity. A Durable Power of Attorney (generally referred to as a POA) is the vehicle used to appoint another person to handle your financial affairs. West Virginia has a statutorily approved POA form. While under some circumstances a person may choose to have a presently effective POA, others prefer that it be effective only in the event of their incapacity or incompetency, known as a springing POA. Your appointee, referred to as your attorney-in-fact, will have the power to exercise control over your financial affairs to the extent you specify in the granting document. And if you so direct or authorize them, your attorney-in-fact can operate your business when you are unable. A springing POA becomes effective only upon incapacity but becomes ineffective when you are able to take over your financial and business affairs again.

Will

A will directs how you want your assets transferred when you’ve passed away. If you don’t have a will, then assets are going to transfer under your estate, and your state’s laws of intestate succession will determine how your property is distributed, which may not be in accord with your wishes. Wills do more than just transfer assets though. You can appoint guardians for your children or a testamentary trust for children that is activated on your death.

The laws of the state in which you reside will govern the effectiveness and construction of these types of documents. States have different laws as to when a will or power of attorney is valid and properly executed and how its provisions will be construed so these documents should be prepared under the law of the state in which you reside. When changing your residence, new documents should be prepared. In addition, your estate plan should be reviewed periodically or whenever there is a significant change of circumstance.

Business Assets

Business assets can be transferred upon your death in a few different ways. First, they can be transferred as part of your will. As a sole proprietor, you could direct that those business assets transfer directly to a successor. It may be necessary to empower your estate administrator to operate your business for a limited period of time. Or business interests can be liquidated and the proceeds distributed to your beneficiaries. Another way business assets can be disposed of on your death is by way of the organizational documents that formed the business. For example, articles of organization, shareholder agreements, and buy-sell agreements can provide for the transfer of your business interests at your death in ways that give the corporation, the other shareholders, and your beneficiaries options.

Gifting and planned gifting during your lifetime is a means of transferring assets and business interests so that ownership and control are transferred gradually to successors. While these gifts are made during your lifetime, they should be considered when you are making your estate plan.

Taxation

Federal and State estate and gift taxes can instruct your estate planning. Business interests are included in the value of your estate for tax purposes and can increase the value of your estate beyond what you imagined it might be, especially if your business interests have appreciated as your business has grown.

More information

For more information about estate planning and wills, reach out to Bernstein-Burkley at info@bernsteinlaw.com or call (412) 456-8100.

Written by Bernstein- Burkley, P.C. on November 16, 2020

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