With great power comes great responsibility, and entrepreneurship is definitely a tremendous responsibility. More often than not, a business is a one-man team, and entrepreneurs, like all human beings, sometimes encounter unforeseen circumstances. Moments like these call for proper estate planning, particularly for three emergency documents known as the Financial Power of Attorney, the Living Trust, and the Last Will and Testament. While estate planning is a broad field, these three tools are invaluable for entrepreneurs who want to safeguard the future of their business assets.
What Is A Financial Power of Attorney? Do I Need It For My Business?
Whether on a business trip or a medical emergency, business owners are sometimes forced to be away from their firms for prolonged periods of time. In these cases, it may be difficult to manage a business remotely and having a backup plan can prove to be crucial, which is exactly where a Financial Power of Attorney (FPOA) comes into play. An FPOA is a legal document that temporarily authorizes another individual to make critical financial decisions surrounding your business on your behalf if you are unable to make them yourself. The person who issues the Financial Power of Attorney is known as the principal, and the person designated to make financial decisions on the principal’s behalf is known as the agent. The agent’s responsibilities may include overseeing and executing business-related matters such as property transactions, stocks, bonds, insurance, taxes, banking, and more. The authority granted to the agent is terminated upon the death of the principal. However, a type of Power of Attorney known as a Durable Power of Attorney can extend the agent’s authority even beyond the principal’s death. Nevertheless, if your Power of Attorney is not a durable one, your agent can only make financial decisions for you while you are alive, and that means in order to be able to control your finances and assets after your death, it is necessary to utilize other documents, such as a living Trust or a Last Will and Testament.
Leaving Your Business In Good Hands – The Living Trust and Last Will & Testament
A Last Will and Testament dictates the fashion in which your property will be distributed after your death. The Will names an executor, a person responsible for carrying out the will’s terms. Tangible property, such as real estate, furniture, and cars, as well as intangible property such as stocks, bonds, intellectual property, and cash in bank accounts, may all be included in a Last Will and Testament. Any property which is owned by more than one party, or to which a beneficiary has already been designated, may not be included in a will.
The function of a living trust falls somewhere between a Financial Power of Attorney and a last Will and testament. A living trust is created by a person (commonly referred to as the trustor) and appoints another person (the trustee) to manage certain property during the lifetime, as well as following the death, of the primary business owner.
While a living trust can help you directly bypass the expensive and time-consuming process of probate, a will can be a surefire way to make sure your assets end up in the right hands should the unthinkable happen. Possibly the only significant difference between the two is that a living trust is typically used to avoid court interference, though unlike a will, it generally doesn’t specify an executor or name any guardians for any children in question.
If an entrepreneur fails to include a living trust or a last will and testament in their estate plan, all of his or her assets will be subject to court intervention. That being the case, these two resources are an indispensable component of estate planning, especially for entrepreneurs who have significant financial assets or have made considerable progress in their entrepreneurial endeavors. Probate may distribute the business into the wrong hands and possibly lead to the misuse of the entrepreneur’s hard-earned property.
Keep Your Business Safe and Avoid Family Conflict
Interestingly enough, entrepreneurial estate planning extends far beyond the business sphere. If you do not have a living trust or last will and your family is unable to manage your business in the event of your death, they may be tempted to sell it, putting a possibly undesired end to your life’s hard work. They may even attempt to manage the business on their own, though as a result of inadequate or insufficient knowledge on matters related to the enterprise, they may make unwise choices, possibly leading to debt, bankruptcy, or other financial crises. A Financial Power of Attorney, a Living Trust, and a Last Will and Testament are all essential documents that will help safeguard your business assets and your family from financial inconvenience and emotional burdens.
Entrepreneurial estate planning gives your business the opportunity to flourish even after your death. It ensures that your assets will fall into responsible hands if you become unable to manage them or pass away. Incorporating these three documents into your estate plan will help secure the longevity and prospering of your business. If you or a loved one currently own a business of any size and are looking to secure its future, it is highly recommended that you consult with a licensed estate planning attorney who can guide you through the process of creating a proper estate plan that will ensure that your business ends up in good hands after your death.