For small business owners, estate planning is crucial to ensuring that operations continue after their death. Although the law varies slightly from state to state, a living trust is generally one form of estate planning which can aid small business owners in this process. An online legal document service can assist you in determining if a living trust is right for you and establishing such a trust to protect your business and loved ones.
Trusts as Business Owners
Simply put, a living trust can generally own a business. Many small business owners use living trusts as an estate planning tool to ensure that they and their families are protected in the event of death or disability. If you transfer the business to a living trust, the management changes which occur upon your death can be easily and smoothly accomplished via the trust itself.
Trusts as Owners of Business Assets
Living Trusts can also own an interest in a business or certain assets of the business. For example, a living trust can own shares in a business or can own the real estate on which a business is located. However, in small business structures such as partnerships and LLCs, the partnership or LLC agreement itself may prohibit a part owner from transferring his interest in the business to a trust. Check your agreement carefully before you begin the trust process.
Advantages
A living trust is a legal mechanism that lets you put your estate plan into action prior to your death. When you transferr your ownership interest in a business to a living trust, your heirs can avoid an extended probate process regarding ownership of the business, avoid certain estate taxes, and keep information about the business out of the public record. Unlike a will, a living trust also protects you should you become disabled and unable to manage your business during your lifetime.
Types of Living Trusts
You may choose to protect your business using either a revocable or irrevocable living trust. An irrevocable living trust, which is often simpler and less expensive to create, is not generally subject to change. Once your business is in the trust, you cannot change your mind, except in certain specific circumstances that vary by each state. A revocable living trust, however, can more easily be altered or undone if circumstances change.
Read More: Taxes & the Advantages of Living Trusts