Most Business Owners Do Not Have

Up-To-Date Estate Plans, But They Should

As long as there are estate taxes, as long as there are intergenerational considerations, and as long as there are interconnected business interests, there will be a need for estate planning. Business owners are looking to achieve a certain agenda and do so in as tax-efficient a manner as possible. However, it’s important to keep in mind that taxes are not the tail that should wag the dog.

According to Anthony J. Carone, managing member of the specialty law firm Carone & Associates, “Basic estate planning employing such strategies and financial products as credit-shelter trusts and traditional life insurance is far from complicated and sufficient for many business owners. However, for more complicated situations there are many more sophisticated strategies available including self-canceling installment notes, granter retained annuity trusts, and remainder purchase marital trusts.”

Based on a survey of 513 business owners, a little more than seven out of ten business owners have an estate plan which is defined as having, at a minimum a will. Among the 138 business owners without an estate plan, half of them have not done the planning because the topic is very hard to deal with. “There are many reasons, “ explains Carone, “From facing the prospect of death to needing to make difficult decisions concerning the disposition of assets including the future fate of the business, estate planning can very well be arduous and emotionally nerve-wracking.”

About 30 percent of the business owners surveyed said they didn’t have an estate plan because there wasn’t a need. “Although there might not be estate tax concerns, it’s usually advisable that everyone have an estate plan, even if it’s only a will,” explains Carlo Scissura, president of the Brooklyn Chamber of Commerce and author of Maximizing Personal Wealth: An Advanced Planning Primer for Successful Business Owners, “This is especially the case for business owners as their company is often an integral and considerable part of their estate.”

For those business owners surveyed who had an estate plan, most of them are over five years old. Almost a quarter of the estate plans are two to five years old, with the remaining 12 percent less than two years old. Frank Seneco, president of Seneco & Associates, an advanced planning boutique says, “Because of changes in the tax laws, estate plans more than five years old – most probably more than a few years old – are likely to not be up-to-date and fail to take maximum advantage of available opportunities.”

What’s even more telling is that more than half of these business owners report that they’re wealthier since they created their estate plans. More importantly, nearly seven out of ten reported that since they created their estate plans they’ve experience life changing events. These events can be anything from divorce to the birth of children or grandchildren to the death of prospective guardians, and so forth.

What this tells us is that, from changes in the tax laws to changes in the lives and wealth of the business owners, their estate plans are likely outdated. In order to attain the greatest benefits from estate planning, business owners need to stay on top of the matter and revise your estate plans when appropriate.

Authored by Russ Alan Prince, Forbes Insights