Estate planning can be an important aspect of your wealth preservation. While that may sound obvious, you’d be surprised at how many people either fail to create an estate plan or create one that is so basic and bare bones that the plan itself doesn’t provide enough protection. This can be dangerous in any situation, but it can be even more risky when you own a business. If you live in a blended family, then things can be even more complicated.
The dangers of estate planning in a blended family
One risky aspect of estate planning in a blended family is the ramifications of intestate succession. If you don’t create an estate plan, then your spouse could end up inheriting a large chunk of your estate, including half of your personal property and half of your real property. Without the protection of an estate plan, your spouse is then free to distribute those assets as he or she sees fit once he or she passes away. Therefore, if your children don’t get along with your spouse, or if there is a rift in their relationship at some point in the future, then your children could lose out on inheriting the bulk of your estate. When a business is involved, this can be significant.
Understand the limitations of a power of attorney
A lot of business owners think that they can avoid some of these dangers by creating a power of attorney. This document names someone who will make important business decisions for you in the event that you become incapacitated. However, someone who is named as a power of attorney in one of these documents may be prevented from earning a wage despite the fact that he or she is essentially running the business, unless a court approves such payment.
Therefore, it may be best for you to place the business in some sort of trust and include the business’s assets in the trust. This may make it easier for your spouse or whoever you want to inherit your business to access the business’s resources. Again, make sure that you understand how the dynamics of your blended family come into play here.
Know how to keep your business and its assets in your family
Remember, if you leave your business to someone, then there’s a strong chance that the business will end up being jointly owned by that individual and his or her spouse if he or she marries later on. In a blended family, this means that half of your business could end up in the hands of your spouse’s future spouse. Again, this can cut your children out of the line of succession and even entirely remove your business from your bloodline. Fortunately, there are legal maneuvers that you can utilize to prevent this from happening.
Create a succession plan to provide clarity
A succession plan can help provide guidance to your loved ones and your business, as it specifies how the business is supposed to transition to new ownership once your gone. Therefore, it’s a good idea to have a succession plan that works in conjunction with your estate plan so that everyone is on the same page.
Competently navigate your blended family and business-related estate planning issues
There are a lot of estate planning pitfalls that you can stumble into if you’re unfamiliar with the estate planning process and how to navigate it to your advantage. That’s why it might be wise for you to discuss your situation with an experienced legal professional. Hopefully then you can rest easy knowing that your loved ones and your business are fully protected in accordance with your wishes.