Today I’m speaking to all of you mothers and fathers who have worked tirelessly to build your small fortunes: your farmlands, your businesses, your rental houses. Are you troubled by this recent change of events in your child’s life? Have you seen a son or daughter perhaps pick a life partner you’re just unsure of? Maybe your child has not decided to marry but may in the distant future. Perhaps you’re just concerned about liability in general.
Instead of turning to the child to defensively protect your estate—why not work offensively? Through the use of Trusts and Business Entities, there is no need to ensure a valid prenuptial agreement is in place or worse, fight to get the assets out of court after divorce proceedings have commenced. You have the ability NOW to outline to whom your assets will pass. What’s more, you have the ability to tailor exactly how the asset will pass to your intended beneficiaries, i.e. in what quantity, under what conditions and through what time frame the distributions may be affected.
Use of Business Entities:
Corporations, LLCs, Limited Partnerships, etc. all are legal boxes in which to place your business assets. These entities are governed by operating agreements which provisions may be flexibly drafted to suit your business and family needs. You can tailor so that only lineal descendants may be members. You may place mandatory first buy out provisions to ensure that the active membership may buy back the interest at deflated values. Those of us engaged in small businesses understand that inherent value may not equate to liquidity. You have the ability to dictate a fair deal up front and in your provisions, as opposed to waiting for a third party to strike the terms of the deal when misfortune occurs.
Use of Trusts:
Similarly, Trusts can be drafted to suit your personal and family needs. Oftentimes, trusts are drafted so that the grantor’s beneficiaries receive the assets outright and free of the trust after the parent has passed away. Trusts may be drafted in a number of ways, however. For instance, you may stipulate that your children receive differing percentages at ages 30, 40, or even 50. You may state that the child must leave the assets in trust and receive only the income during his or her lifetime. You may maintain principal distributions based upon the health or maintenance needs of the child but include protective provisions that prevent a third party from ever obtaining distribution through your named heir.
These are all planning opportunities that are out there for you to dictate and decide. If you do not take offensive action now, you may be stuck playing the defensive role in the future.
This article was written by Jessica B. Moon, Attorney licensed in Ohio and Florida. David Bacon; Jeffrey Roth; and Jessica Moon are members in Roth & Bacon Attorneys, LLC. The Offices are located in Upper Sandusky, Marion, and Port Clinton, Ohio, and Fort Myers, Florida. They have focused their practice to provide estate and business planning concepts to their clients. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to help educate the public on concepts of law as they pertain to estate and business planning. Copyright @ Jessica B. Moon 2015.