Yorkville Business Estate Planning Attorney: Strategies for Successful Businesspeople

 Posted on January 13, 2023 in Estate Planning

Estate planning is critical for families, particularly owners of small to medium-sized businesses owners and their families. High-net-worth and high-income families have complex estate planning needs. This article will discuss the core estate planning and asset protection strategies for successful businesspeople. Effective estate planning and asset protection will build a solid legal foundation to protect against incapacity and death. More importantly, building a solid asset protection plan will place roadblocks to shield a person's and family’s business and personal assets from liability concerns that threaten one’s wealth.

ESTATE PLANNING TIPS FOR CLOSELY HELD BUSINESS OWNERS AND THEIR FAMILIES

The first step in advanced planning in representing business owners and their families is conducting a risk assessment. A risk assessment is a review of a person’s assets and the legal risks that could jeopardize a business owner’s financial security and retirement goals. As Yorkville Living Trust attorneys, we interview the client and their families and identify their concerns such as things that keep them up at night. A business asset protection planning attorney can help clients conduct a comprehensive and thorough investigation and risk assessment to identify potential threats to their assets, such as lawsuits, creditor concerns, or economic downturns.

The second step is to interview the client and their families to assist them to develop their estate plans. An estate plan will consist of the following core documents:

Living Trust and Estate Planning

A Living Trust is a legal document that sets forth one’s goals and legacy. A Living Trust is created by a couple (or single person) and appoints a trustee (or co-trustee) to manage and oversee their financial assets. A Living Trust is like creating a Limited Liability Company or Corporation and appointing an executive team to run the day-to-day operations. A Living Trust is an outline and contingency plan for one’s life, which summarizes who shall inherit their hard-earned business and personal assets.

Developing an estate plan for a businessperson requires careful planning and consideration of a variety of factors, including the person’s family arrangements and any conflicts that may exist. Here are some steps to consider when creating an estate plan for a businessperson or their family:

• Determine a person’s goals and objectives. This should include considering a person’s family arrangement and any conflicts such as stepchildren or blended family conflicts that exist. One of the ways of identifying these potential estate conflicts is to ask questions to the client because they understand their family dynamic. 

• Identify the person’s personal and business assets including their business interests, individual property, real estate, and financial accounts. This help to identify vulnerabilities, which exist. These vulnerabilities present significant lawsuit and asset loss concerns.

• Identify how vacation property, personal residences, and investment real estate are titled and consider re-arranging these assets in a manner that minimizes or eliminates liability concerns.

• Develop asset protection and business liability strategies. Based on the result of the risk assessment, a business asset protection attorney in Yorkville and Kendall County can help clients develop strategies to protect their assets. This may include the use of legal entities, such as trusts or limited liability companies to shield assets from creditors or lawsuits.

• Providing insurance advice. Insurance gaps are a significant concern because insurance can be a useful tool in protecting a business’s assets. A business asset protection planning attorney can advise clients on the types of insurance that may be appropriate for their business, such as liability insurance or business interruption insurance. Other types of insurance that business owners should strongly consider as personal umbrella insurance policies and commercial liability insurance policies.

• Review of employment agreements such as non-disclosure and non-compete agreements should be considered for key employees. The loss of a key employee can share vital trade secrets and business secrets that are vital to the profitability of a closely held business.

• Advising on tax planning. Tax planning is an important aspect of asset protection for businesses. A business asset protection planning attorney and tax attorney can advise clients on strategies to minimize income and estate taxes, such as using tax-advantaged investment vehicles or structuring business transactions in a tax-efficient manner.

Advanced Healthcare Directives and Powers of Attorney for Medical Decisions

Advanced healthcare directives are legal documents that allow a person to specify their wishes for medical treatment if they are unable to make decisions for themselves. These directives can include a living will, which specifies the types of medical treatment the person does or does not want to receive, and a durable power of attorney for healthcare, which designates a trusted individual to make medical decisions on the person’s behalf.

There are several legal risks associated with advanced healthcare directives, including the risk that the directive may be misunderstood or misapplied by healthcare providers. It is important to make sure that the directive is clearly written and that it accurately reflects the person’s wishes. It is also important to choose a trusted and competent healthcare agent and to discuss the directive with them to ensure that they understand the person’s wishes.

Another potential legal risk associated is that the directive may be challenged by family members or may not be legal across all states. A major purpose of a durable power of attorney for medical decisions is to document a person’s wishes in case of a medical emergency. It is highly recommended that a person creating a medical power of attorney discuss their wishes and desires with their desired healthcare agents.

A Power of Attorney for Property

A Yorkville Estate Planning Lawyer can assist you and your family develop a power of attorney for property or otherwise known as a “financial power of attorney”. A financial power of attorney is a legal document that allows a person called the “principal” to appoint another person called “the agent” or “attorney-in-fact” to manage their financial affairs if they become incapacitated or otherwise are unable to independently manage their financial affairs. A person will still need an attorney because being designed as an “attorney-in-fact” does not grant a person the ability to practice law. However, the attorney in fact can make checking deposits, close banking accounts, and sell real estate among many other important financial decisions.

There are several reasons why a power of attorney for the property is important:

• It allows the principal to plan for the possibility of incapacitation: By creating a power of attorney for property, the principal can ensure that someone they trust can manage their financial affairs if they become incapacitated due to illness, injury, or advanced age

• It saves time and money: Without a power of attorney for property, a court process called guardianship may be necessary, which restricts a person’s liberty, and the court must approve financial decision-making. The financial power of attorney saves thousands of dollars in attorney’s fees and provides peace of mind in the event of a financial emergency.

• It provides flexibility: the principal can specify the specific powers that they want their agent to have and can tailor the power of attorney to fit their specific needs and circumstances.

• It helps avoid family conflicts, which destroy families and lead to estate litigation. By designating an agent to manage their financial affairs, the principal can help avoid potential conflicts or disputes among family members over who should make financial decisions on their behalf.

Overall, the financial power of attorney for property ensures the legal risks of incapacity. A power of attorney for the property develops a plan to minimize risks and set forth a strategy to address financial concerns in the event of incapacity. A living trust is creating a smooth transition upon one’s financial incapacity, which significantly differs from a will. A will is only a legal instrument to address the issue of the distribution of assets upon death. In summary, the power of attorney for property reduces the legal risks of incapacity and sets forth a realistic and solid plan for appointing attorneys in fact and alternative attorneys in fact.

Life Insurance Strategies

There are two major strategies to deal with life insurance. Life insurance is a significant asset for high-net-worth families and income earners. Life insurance is designed to replace a person or family’s income in the event of a death.

Estate tax planning refers to the process of organizing a person’s assets in a way that minimizes the amount of estate taxes that will be due upon their death. In Illinois, the estate tax applies to estates with a value of more than $4 million. The tax rate is progressive, with a top rate of 16 percent. Life insurance is a significant asset, which could bump a person’s family into a taxable estate in Illinois.

An irrevocable life insurance trust or otherwise called an “ILIT” is a type of trust that is used to hold a life insurance policy for the benefit of the trust’s beneficiaries. The trust is “irrevocable” because, once it is created, the person who created the trust (“the grantor” cannot change the terms of the trust or take back assets that have been placed into the trust. 

There are several reasons why someone might consider creating an ILIT. Here are some reasons:

• Avoidance of probate. When a person dies, the assets must go through the probate process before they can be distributed to their beneficiaries. Life insurance proceeds are paid directly to the policy’s beneficiaries and are not subject to probate. By placing the policy into an ILIT, the proceeds will be paid directly to the trust, which can then distribute the funds to the beneficiaries according to the terms of the trust agreement

• To reduce estate taxes in particular Illinois estate taxes. If the value of a person’s estate exceeds the applicable estate tax threshold, their heirs may have to pay estate taxes on the excess amount. By placing a life insurance policy in an ILIT, the death benefit of the policy can be used to pay estate taxes that may be due or better yet avoid estate taxes by placing the life insurance asset outside of the estate. By placing the life insurance asset outside of their estate, the estate taxation issue is eliminated.

• To protect your beneficiary’s assets in case of a divorce or creditor’s claims. The ILIT can also be structured in a manner where professionals can be appointed to manage one’s trust and protect your beneficiaries from inexperience, immaturity, or lack of financial expertise.

Estate tax planning refers to the process of organizing a person’s assets in a way that minimizes the amount of estate taxes that will be due upon their death. In Illinois, the estate tax applies to estates with a value of more than $4 million. The tax rate is a progressive tax rate with a top rate of 16 percent. The use of exemptions and exclusions in Illinois may reduce the value of an estate for tax purposes. For example, the estate tax does not apply to transfers to a surviving spouse or charitable organizations. Furthermore, estate tax planning involves the use of trusts to pass a family’s assets to their loved ones in a tax-free manner.

CONTACT A KENDALL COUNTY BUSINESS ESTATE PLANNING ATTORNEY: REDUCE YOUR LIABILITY RISKS AND SET UP AN ASSET PROTECTION THAT PROTECTS YOUR ASSETS AND PROVIDES PEACE OF MIND

Peace of Mind Asset Protection, LLC specializes in estate planning and business planning for closely held businesspersons and their families. High-net-worth and high-income families require advanced planning involving the use of trusts, limited liability companies, and other liability-reducing strategies to place their assets favorably. Placing one’s assets such as real estate, business interests, and other assets favorably, significantly can reduce or eliminate legal risks. Call a Yorkville Living Trust Lawyer at 630-882-2467 or fill out our online contact form and an attorney or staff member will call you to set up an initial consultation.