For many, the word “probate” conjures images of stressful, expensive, drawn-out and incomprehensible courtroom dramas. If you’re a Florida business owner or member of a business partnership, rest assured that bad dream doesn’t have to come true for your spouse and children. It’s only likely if you haven’t thought carefully enough about your estate plan.
Limit probate and structure the rest
Florida probate judges are Florida probate judges, and don’t always have specialized training in business law. Your assets in probate will be subject to their decisions. Your children are likely to be probably better off with you thoughtfully making most of the decisions.
The first order of business, then, is to let probate handle only those assets for which there’s no other option. In Florida, assets most typically used to skip probate include life insurance, bank or brokerage accounts with payable on death beneficiaries.
For everything that must go through probate, presenting the probate judge with unambiguous agreements will maximize your control over what happens and how fast as well as how much it will cost your heirs. Most importantly, your business should consider establishing a well-drafted buy-sell agreement, if it hasn’t already.
Trusts and titles and guidance for the probate court
Using a living trust for assets like your stock is usually simple, and your interest in an LLC or partnership is only a bit more complex. You can use a revocable trust to continue managing your assets and business, although with large tax bills. An irrevocable trust relinquishes control to the trustee you name, but the tax advantages can be significant.
Be sure to appoint an executor and establish power of attorney provisions to help keep the company’s cash flow and the family income sorted out in a timely way.
Any real estate or other property that the business owns will be handled like the business’s other assets when the time comes to settle your estate. But if you own the property and rent it to the business, you can bypass probate by titling the property correctly, such as with joint ownership with right of survivorship.
Any other personal property involved in the business, such as patents or life insurance policies on your partners, should be titled and beneficiaries named to minimize ambiguity in probate court.
You can read a more detailed discussion of these suggestions written by a retirement planner and Forbes contributor.