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Estate Planning for Law Firms and other Businesses

Estate Planning For Law Firms and Other Businesses

Many people don’t realize that their business needs estate planning too. Professionals have an even harder time ensuring that their businesses don’t go through probate upon their passing and/or their clients aren’t neglected. The issue is especially pressing in cases where there is only one solo practitioner running the business. One great option for business succession planning is appointing a person, in the same field or profession, to wind down or take over the business upon incapacity or death.

Some businesses may be assigned to revocable trusts (on a case-by-case basis), while others, such as law firms and professional companies must comply with strict ownership restrictions imposed by professional licensing boards. For instance, a law firm cannot be owned by a revocable trust because the revocable trust never went to law school or passed the bar. Even though the revocable trust is regarded as an alter ego for tax purposes (during the lifetime of the grantor), that still doesn’t suffice pursuant to the licensing and ethical requirements of the profession. The same may be the case for other professions such as doctors and/or accountants.

One solution could be to create a business succession plan that selects a successor, or multiple successors, as the case may be, to purchase the business in the event of incapacity or death. This could be an employee or other trusted professional. Life insurance is usually involved in funding such purchase. Your successor(s) can even begin running the company long before you’re gone to ensure the transition is smooth. Another solution for solo practitioners could be to draft a document electing a trusted administrator to wind down the affairs of the business and handle any client matters in your absence. Both options should be coordinated carefully with your personal estate planning.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.