Are you concerned about the future of your business once you’re gone? Also, do you know who will manage the properties you left? You might think that the best way to secure the line of succession is by creating a will. However, even this is not enough to escape the legal process of probate, mainly if the business consists of different business partners.
Probate is the legal process of verifying and validating the legitimacy of a will. The probate court is where legal battles concerning the validity of the will happen. This is the most common issue remaining business partners, families, and would-be successors usually face when one of the owners passes away.
However, probate cases don’t end up quickly, and these usually involve long delays, expensive legal costs, and brutal open court battles. Probate proceedings may take years to conclude. But, if you think about it, the problem only lies in a complicated and chaotic estate plan.
Fortunately, you can avoid such situations if the deceased can leave everything in its proper place. According to experts, here are a few practical ways that may help you prevent going to probate court:
1. Create A Living Trusts
One of the easiest ways to prevent going to probate court is placing all your assets in a trust. These include your corporate stocks and business interests, such as those under LLC (Limited Liability Company). However, it will not resolve all the issues concerning your estate plans. But if your business is entrusted in a living trust, you’ll most likely avoid any probate battles.
Dealing with corporate stocks is pretty easier than handling business interests. All you need to do is transfer these stocks to trust, and you have nothing to worry about. However, things may get a little complicated when dealing with business interests, such as LLC membership and partnership shares. With business interests, the process of transferring everything in a trust is much more complex, but it’s still viable.
When transferring all your assets in a trust, you need to make sure it’s a revocable or irrevocable trust. These two different processes will allow you to avoid probate, but they have other vital roles to play.
A revocable trust allows you to continue managing all your assets, including your company. However, it doesn’t protect you from taxation due to estate concerns. Also, with this, you can change the terms anytime you want.
On the other hand, an irrevocable trust may protect you from estate taxes. However, you have to transfer the control of your assets to your trustee. Because of this condition, only a few business owners opt for this. In addition, you must be careful when choosing your trustee and make sure that they are someone you can put your life on the line with.
Furthermore, this trustee will transfer all your assets to your chosen beneficiaries according to your will without having to go to probate court.
2. Examine Your Real Estate
Suppose your business is considered a separate legal entity and has real estate properties under its name. In that case, you will claim it as the company’s assets under business interests. However, there are instances when the owner rents the properties to the business, meaning the real estate assets are separately owned and not a part of any company.
This will help you circumvent the probate process. To begin the process, you may transfer your real estate under joint ownership with clear survivorship, life estate, or through transfer on death (TOD) deed. These processes will help you quickly transfer your real estate properties to your beneficiary while avoiding the probate process.
3. Create A Joint Ownership
Joint ownership is one of the easiest ways to transfer assets in an instant. It’s excellent for owners who want to share the business’ control, ownership, and assets with their family members.
However, many businesses never try to do this. This will help you simplify the process of your company’s legal inheritance. Because of this, the legal ownership will be passed down and continued with the surviving owners, circumventing the probate process.
Also, this allows you to place anyone you want to become a beneficiary, and it will automatically reflect once the owner is proclaimed dead. In addition, you may apply for a TOD deed to execute the transfer as soon as possible.
4. Establish Wills And Powers Of Attorney
In law, the probate court helps the deceased owner to do whatever they wish based on the instructions they left. However, these should be executed legally, and you can do it by creating a will.
A will of testament is nothing but a statement telling the court what they want to do with their assets, including the people they wish to receive or manage them. However, as mentioned above, they will not protect you from the probate process, but they can reduce the entire cost of the process. So, it would still be better to have it than not to have anything.
Without a will, the probate will continue to begin automatically. Also, without anything that will ensure the management’s continuity, the court will be forced to determine what to do with assets left. This includes the payment of debts, spousal inheritance, and the company’s management.
On the other hand, a power of attorney may help you if you die or lose the capability to run the company and manage its assets. However, the lawyer has no right to interfere with the business interests.
Final Words
Death is an inevitable enemy of most business owners, especially when transferring their assets, properties, and business management. Because of this, it will likely end up having probate problems.
Probate is one of the issues most business owners usually face. However, you can prevent this from happening. That being said, you would need to consider the tips presented above and see which one perfectly applies to your company.
Also, you may ask a probate lawyer that will help you accomplish things that will circumvent the probate process.
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