Estate Planning Misconceptions for Small Business Owners

Estate planning, the process of arranging for your assets in the event of your incapacitation or death, may seem straightforward. However, several misconceptions about estate planning persist among small business owners.

Misconception #1: A will alone avoids probate.
Despite common belief, having a will doesn’t circumvent probate. Assets solely in your name without designated beneficiaries require probate, a court-managed procedure to settle debts and distribute assets. Probate entails costs and can take a year or longer.

Misconception #2: Your will solely dictates asset distribution.
Contrary to popular belief, assets like bank accounts, life insurance policies, and retirement plans with named beneficiaries pass directly to them, bypassing the will. Effective estate planning ensures these assets align with your wishes.

Misconception #3: Trust creation avoids probate without funding.
Merely establishing a trust isn’t enough to avoid probate; proper funding is crucial. Consulting an estate planning attorney is essential to discuss strategies like a revocable living trust and ensure proper asset allocation to the trust.

Misconception #4: Estate planning concerns only post-death asset management.
Estate planning extends beyond asset distribution after death. Vital documents like durable powers of attorney for finances and healthcare, along with living wills, protect you in case of incapacity, sparing loved ones the ordeal of court proceedings for guardianship.

Misconception #5: Estate planning equals succession planning for business owners.
Differentiating personal estate planning from business succession planning is vital for small business owners. While succession planning ensures business continuity, estate planning ensures smooth transition and compliance with probate laws, especially crucial for family businesses.

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Freya Allen Shoffner, Esq.
Shoffner & Associates
Counselors to Small Business and Families.

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