When You Die, Will Your Business Survive?

If you — the sole owner of a Minnesota business — die unexpectedly, what happens to your business?  Will it survive, or will it die with you?

Procrastination regarding establishment of a succession plan for one’s business is all too common. Minnesota business owners naturally believe that they have lots of time before facing death, and they don’t want to spend time or money dealing with the succession issue until “later”.

Your spouse may be of limited help because your spouse doesn’t want to run your business, or doesn’t have your marketing know-how, business savvy or connections.

Consider the roles played by the following persons in a typical estate plan: a personal representative (a/k/a executor), a person granted power of attorney powers, and a trustee.

The power of attorney holder won’t be able to assist your business after you die because that power expires at your death.

The person that you’ve designated in your Will as your personal representative can make some business decisions, but your personal representative won’t have the authority to act until a probate court in Minnesota accepts your choice as the Personal Representative. That process could take a month or more in Minnesota.

Your best bet may be a Revocable Living Trust. If you put your business interests in a Revocable Living Trust, you can mitigate some of the peril that may occur when you, as the sole owner, become incapacitated or die. Upon your death or incapacity, your hand-picked successor trustee can manage the business assets.

Your trustee does not have to be approved by a court. Therefore, your trustee can immediately step in to make business decisions to protect your business. In this way, a Trust-based estate plan works more efficiently than a Will-based plan for a single-owner business.

Importantly, you can name yourself as the initial trustee of your Trust, which gives you complete control over the business assets held in the Trust as long as you are alive and have mental capacity. You can also handpick your successor trustee, who will act when you no longer have the mental capacity to do so, or are deceased.

Even prior to your death, a trustee has greater flexibility and discretion to manage your business assets than does the person to whom you’ve granted a durable Power of Attorney. Why? Your trustee has legal title to your assets whereas the person to whom you’ve granted power of attorney powers does not. And, as noted, the Power of Attorney authorization ends at your death whereas your trustee’s powers continue after your death.

Consult with an attorney to explore ways to best protect your business and business assets. You’ve worked hard to build your business, so don’t let it flounder at your death or incapacity.

©2013 Wittenburg Law Office, PLLC. All rights reserved.

Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney.  An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305   952-649-9771   www.bwittenburglaw.com    bonnie@bwittenburglaw.com