Why Business Owners MUST Have a Living Trust
We strongly recommend that if you are a business owner, having a Revocable Living Trust (RLT) is critical for several reasons.
Control by the Right People, Not the Judge!
Our first reason has to do with running the business. If you are a small business owner, you need to address the obvious issues of disability income in case of incapacity. In addition, you should also review your life insurance for possible needs such as income replacement, succession planning, and possibly estate tax planning. But there’s also the practical issue of running the business day-to¬day.
Who Is in Control of the Business?
Who is in control and makes the key decisions in the business upon your death? If there are multiple owners, the strategic use of a shareholder agreement or an operating agreement sets up the process of what to do and who has what rights in case of a buyout.
This is a much easier issue, but what if you are the sole owner? What should be done with the business? Should it be shut down? Can the business be sold as an ongoing concern? Who should make these crucial decisions?
Key Business Decisions Made by a Judge?!
If you use a Last Will and Testament, then a judge appoints someone to run the business, and then a judge approves their plan of action. But this takes time and it requires court hearings, the testimony of experts, as well as money to pay lawyers.
In the meantime, critical decisions need to be made in the business quickly, because business as an asset of the estate diminishes in value rapidly.
What about Incapacity of the Owner?
In some cases, death is cleaner and easier for the business. What if you become incapacitated?
Who runs the show? What is their mandate for running the business? Who makes the tough business decisions?
In a probate, the probate judge is not in any position to make a good business decision. They may be intelligent and wise people, but they don’t know the owner’s business and will probably not be in the best position to make decisions about that business.
Using the Living Trust for Business Owner
The RLT is the best solution for planning for the business owner. If properly used, the Trust can put the right people in control of the business, not a judge. Nothing can destroy the value of the business than burying it in the quagmire of the probate court.