In this three-part series, Lott and Company outlines the why, what, how and who around the essentials of creating an estate plan that effectively preserves, manages and distributes your personal and business assets after death.
If you have not yet reviewed part one, we encourage you to visit Part One where we covered why an estate plan is essential and what strategies are available to meet your personal and business goals.
In this second part we will cover how to lay the foundation to support an effective estate plan.
How to lay the foundation for an effective estate plan.
Ensure Wills and Power of Attorneys (POA) are in place and up to date.
A properly drafted will ensures the business transitions smoothly and ends up in the right hands
Granting a power of attorney enables a trusted individual of your choosing to make financial decisions if you are no longer able
Appoint a competent executor/trustee
Should be familiar with the business and have the time and expertise to manage the affairs of the estate
Should be objective and capable of dealing with potential conflicts of interest among relevant parties
Executor should be enabled to hire the appropriate advisors when required
The will should address fees paid to the executor and advisors
Develop a survivor’s business plan
Although not a legal requirement, a written business plan provides direction to survivors
Should outline steps that need to be taken to preserve the value of the business if the owner dies or becomes physically or mentally disabled
Outline company goals, critical success factors, key employees and action plan or action items
Include net worth statement that lists all assets and liabilities to ensure nothing is overlooked
Indicate potential liabilities (tax etc)
Ensure adequate life and disability insurance
Provides income for the family in the event of disability or death of the owner
Useful to pay taxes on large capital gains and other liabilities of the owner
Need to review what funds are required to eliminate existing and potentially new liabilities and pay family living expenses
Very important when the business assets make up a large portion of the estate and not all beneficiaries are involved in the business
Key Person Insurance
Considered for key employees that are critical to the business and provides funds to reduce any corporate borrowings of the key employee or support the business through its transition to a new successor
In the upcoming final part of our Lott & Associates three-part Estate Planning series we will discuss how to ensure your family/benefactors are taken care of per your estate directives and who can assist you to ensure your goals are met.
We would like to thank Lott & Company Professional Corporation for being this week's RHBOT Guest Blogger and bringing us this incredible series.
Lott & Company are experienced in working with clients to review, update or design an estate plan that considers unique circumstances and ensures personal and business assets are protected and distributed specific to requests. They have worked with many business owners (and their financial and legal advisors) to develop tailored estate plans that suit their needs and wishes.
Lott and Company
500 Cochrane Drive, Unit #5
Markham, ON L3R 8E2