Small business owners overlook the importance of estate planning.
Tony owned a small dental practice. He was married with two young children. He worked out regularly and appeared to be in perfect health. One night, Tony had a massive heart attack. Unfortunately, he was placed on life support. The trauma and stress of the event was difficult on the young mother. However, the stress of dealing with the business was far greater.
Since Tony was the sole owner of his dental practice, his wife did not have any authority over the practice. She could not pay bills on behalf of the company. She could not make deposits on behalf of the company. She could not access the bank account of the business. Her husband was still alive, so her options were limited. In order for her to have access to the business, she would need to request conservatorship over her husband.
A conservatorship is an individual, appointed by the court, to be in charge of a person’s estate. It is a mechanism used when people lack the capacity to handle their own affairs. A conservatorship is expensive and takes time. In this situation, by the time a conservatorship would be granted, her husband would likely be deceased. Therefore, she had no choice but to wait until his death to enter probate and hope she could salvage some equity from the business.
If Tony and his wife had an estate plan, the dental practice would have been assigned to their living trust. Upon Tony’s incapacity, his wife, as trustee, would have full authority over the dental practice. She would immediately gain access to the bank account and have the ability to sell the practice. Most importantly, she would be able to focus on her husband and her children.
I tell my clients that we are planning for the unplannable. Proper estate planning is more than avoiding probate. It is ensuring that when the unthinkable happens you are prepared. It allows you to focus on the people in your life that need you instead of wasting time and money on unnecessary court proceedings. Estate planning should not be an afterthought.
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