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What Is a Special Needs Trust, and Can It Protect My Special Needs Loved Ones?

If you’re concerned about your special needs children or loved ones after you’re gone, understanding special needs trusts in California can be crucial for safeguarding the future of your loved ones with disabilities.

A special needs trust combines asset protection and estate planning. This combination helps ensure the long-term support of your loved one but doesn’t usually jeopardize the government benefits they may be receiving, such as Medicaid and SSI.

Special needs trusts (aka SNTs) in California are uniquely designed to benefit children and family members with disabilities and hold some somewhat unique combined characteristics, such as;

• Protection of assets for your loved one – Any assets held in a special needs trust do not count towards the beneficiary’s asset limits when applying for or receiving government benefits.
• Allowance of discretionary spending if necessary – The trustees have the power and authority to allow discretionary distributions to assist the beneficiary’s needs beyond what their government benefits may cover.
• More flexibility in their use – SNTs can be designed to meet the beneficiary’s unique requirements. This ensures more personalized support for your disabled loved ones’ needs.

All in all, a special needs trust can be a valuable and powerful legal tool that can be uniquely drafted to protect your special needs family member if you become incapacitated or die. However, SNTs are legally complex documents, and if you are considering an SNT, the help of a conscientious, knowledgeable, and experienced special needs lawyer is mandatory.

Does a Special Needs Trust Differ from a CalABLE Account?

California does attempt to give loved ones living with disabilities and their families varying options to deal with their future care, and a CalABLE account is one of them.

Having a CalABLE account may sometimes help with future planning for your disabled family members, but there are limitations on the scope and use of these accounts.

Suppose your disabled family member receives Medi-Cal benefits. In that case, a CalABLE account provides some tax-advantaged savings and allows your special needs family member to save up to $16,000 per year and up to $529,000 in their lifetime without losing their Medi-Cal benefits.

A CalABLE account is essentially a tax-advantaged savings account that earns interest for your disabled loved one. This interest is tax-free and does not count as income when applying for benefits.

So, your disabled family member can save for the future and disability-related expenses, but it doesn’t jeopardize their government benefits.

However, if you’re considering a CalABLE account, it’s still prudent to discuss all your goals and financial plans with a local, empathetic, and knowledgeable estate planning law team. CalABLE accounts may be suited to some situations but not to others. For example, a special needs trust is commonly significantly more financially flexible and can be uniquely designed to the specific needs and circumstances of your particular special needs family member.

Can A Special Needs Trust Help to Maximize My Disabled Family Member’s Benefits?

The simple answer is yes, it can in most cases. Most special needs trusts offer significant and valuable benefits in planning for the care of your special needs family member from both a legal and personal aspect. This commonly makes them a useful tool for families with members who have disabilities.

Just some of the legal benefits and protections are;

• An SNT will preserve their government benefits – One of the main advantages of an SNT is the ability to hold assets without affecting a beneficiary’s eligibility for government or state programs.
• Specific asset management and protection – SNTs are legally secure and help to manage and protect your disabled family members’ assets. This significantly helps to ensure that these assets are used appropriately and only for the benefit of the beneficiary.

Some of an SNTs personal advantages are;

• The assurance of long-term care – A professionally drafted and executed SNT ensures the beneficiary will have access to resources for their care and well-being well into the future.
• Enhancements in quality of life – SNTs can supplement government benefits and provide additional resources to beneficiaries to improve their quality of life. The SNT can provide resources for educational opportunities, personal care necessities, recreational activities, and much more.

Of course, every situation and set of circumstances differ, and these are complex documents designed to work in the future to benefit your special needs loved one for years to come. Therefore, they must be strategically drafted to meet, at times, very specific needs. Thus, a complete and detailed discussion and plan should be ironed out with a skilled professional specialist in these valuable legal tools.

Are There Different Types of Special Needs Trusts?

The area of the law that deals with special needs trusts and planning is a complex and specialized area of the law.

You know that if you have a family member with special needs, protecting them if you die or become incapacitated is always a vexing problem on your mind.

However, by obtaining the proper professional advice and utilizing an SNT, you can protect your loved one and provide them with a higher quality of life.

There are various types of special needs trusts available in California; however, the two most common are;

• The First Party Special Needs Trust – This SNT is drafted by a parent, grandparent, legal guardian, or the Court to benefit a family member with special needs. The Trust must be funded with funds owned by the person with the disability. This type of SNT is subject to payback provisions. This means that when the beneficiary dies, an appointed trustee must use any of the remaining trust assets to repay the state of California for all benefits they provided.
• A third-party special needs trust (SNT) is funded with another person’s assets, not the beneficiaries. It is the most common SNT used by parents or relatives to provide for a child with a disability. This type of trust is not subject to any payback provision.

With the professional help of a well-versed estate plan lawyer, a special needs trust can provide a well-designed and detailed framework for proper medical care and asset management and protect your family members’ assets from creditors and financial predators.

I Want More Information About Special Needs Trusts; How Should I Proceed?

Planning for the future of your special needs child or another family member can seem daunting. However, by obtaining the proper and most current information possible from a skilled, highly experienced, and empathetic special needs planning lawyer, you can be sure your special needs loved ones’ future is sound and secure.

The well-versed special needs planning lawyers at Cava & Faulkner have a long, compassionate, and effective track record of assisting Californian families in giving their special needs family members a long, happy, and fulfilling life.

Call them today at 916-831-7565 for a free consultation on your case. They will work tirelessly to put this constant, nagging worry behind you.

What Is a Power of Attorney, and Why Do I Need One?

As you enter your thirties or forties, you see that anyone’s life, young or old, can change quickly. Let’s say you’re a young father and get into a car accident on the way to work; you now could be unable to handle your affairs.

This is why setting up a power of attorney so a trusted friend, relative, or professional can make these decisions for you is wise, prudent, and smart.

Any power of attorney (or POA) gives one or more trusted individuals the power to act on your behalf as your attorney-in-fact when you can’t do so; for example, during an illness, accident, or mental trauma.

There are specific powers of attorney, and some only authorize limited powers, but others can cover a wide range of issues, such as financial matters, health decisions, real estate transactions, and more.

For example, let’s say you cannot manage your financial affairs; a financial power of attorney can appoint someone to manage these matters and ensure they’re handled following your precise wishes, plans, and goals.

However, there are limitations, and if you are killed, your power of attorney will no longer remain valid or legally binding. Upon your death, other legal issues will arise, and usually, a trustee or executor of your will now execute all aspects of the estate plans you previously created.

By consulting with a skilled, experienced power of attorney lawyer, you can explain all the details of your unique situation, and your lawyer will provide all the legal options that a professionally drafted, detailed power of attorney may offer to resolve your concerns and put your mind at ease.

If I Set Up a Power of Attorney, What Vital Factors Must I Consider?

Of course, the first thing to do is to obtain a thorough consultation with a qualified and knowledgeable power of attorney law team. Your meticulous and empathetic law team will help you determine precisely what you wish to accomplish with your POA and also provide the best type that suits your unique needs.

That said, one of the most critical decisions you must make is who will be assigned the responsibilities of being your attorney-in-fact; this job can be stressful and time-consuming and is not a good fit for everyone.

Then, before you decide who will manage your affairs, discuss this duty thoroughly with them and ensure they are able and willing to do the job.

Most relatives, etc., you speak to may wish to help but might be the wrong person to manage your affairs for the following common reasons;

• They are too busy to do the job – Most people have lots to do today, and taking on the additional tasks involved in adequately managing their affairs could be overwhelming.
• They are willing but unable to do the job—Being placed in this position, they must be experts at paying attention to details. If they are unhealthy or disorganized, they probably will not do an excellent job of managing your money, assets, etc.
• They are indifferent or don’t care – Managing your affairs is serious, and if your attorney-in-fact doesn’t care enough, they’re unlikely to notice poor care, abuse, financial issues, etc.

These are only a few reasons that choosing the right attorney is critical to this vital process.

Also, it is wise to have a backup agent if your primary agent becomes unavailable. Once a well-drafted and detailed POA is in place, how well it’s implemented becomes the most critical factor. This is why you may consider using your estate planning lawyer as your “attorney, in fact;” as a professional, they’ll know what must be done and ensure all your directives are carried out according to your precise specifications.

In California, What Are Some Of the Requirements For a POA?

Every state has different legal rules to draft and legally enforce your POA. So, to create a legally valid power of attorney in California, the document must meet some basic requirements, such as;

• You, as the principal, must be at least 18 years old.
• You must hold the mental capacity to fully understand your POA and its legal consequences and ramifications.
• Your agent, who will manage your POA, must also be 18 years old and have the mental capacity to understand and manage the duties demanded by the POA.
• Your POA must be appropriately executed, such as needing to be signed by a notary public, and usually have two competent witnesses
• If your POA contains real estate transactions that must be done, it must be notarized and possibly have other legal stipulations.
• If you are in a nursing home and have a medical POA, it needs to be witnessed by an ombudsman (or patient advocate) in addition to the notary and other directives.

Each POA differs, and so may the rules and legal requirements it must have; this is the most significant reason to have the guidance of a skilled and professional California power of attorney law team.

Are There Various Types of POAs, and How Do I Know Which to Use?

This is another vital factor you must get right so the POA you draft does exactly what you want it to do. For this reason, there are various options for a California power of attorney, such as;

• An advance health care directive – This is usually a classic medical POA that allows your agent to manage health care decisions on your behalf and a living will that outlines your wishes and preferences regarding medical treatment.
• A durable POA – This is one of the most valuable powers of attorney, as it remains effective even if you (as the principal) are incapacitated and unable to make your own decisions. However, it also must include specific legal terminology to be effective.
• Limited POA – This standard financial power of attorney gives your agent authority over particular duties for a limited time.
• General POA – Usually a financial power of attorney that allows your agent broad authority in managing your financial and business affairs.

Once again, every situation and the POA that must be used to manage it correctly differs. Therefore, the professional advice and guidance of an empathetic and thorough power of attorney lawyer is mandatory.

I Need Advice on Drafting a Power of Attorney; How Should I Proceed?

A power of attorney is a powerful and highly effective legal tool as long as it’s drafted to your precise specifications, allowing it to solve the issues you address and nothing more.

It also must be in place before you lose your ability to think or function adequately to manage your affairs. It also requires a person or professional you trust who will faithfully and dutifully carry out their responsibilities on your behalf.

The law firm of Cava & Faulkner has a long, successful, and empathetic history of drafting and creating powers of attorney that meet your specific needs and ensure that all your precise wishes are carried out. Call them today at 916-831-7565 for a free consultation on your particular needs and concerns. They will use their substantial knowledge of California POAs to make sure your family and affairs are cared for if you become incapacitated.

What Is the Difference Between Trusts and Wills?

Wills and trusts are key components for estate planning, and both ensure that the assets listed in either reach their intended beneficiaries after the original asset owner’s death. But there are some key differences.

• Wills don’t go into effect until the estate owner passes, while trusts are usually live as soon as the creators sign the trust and the assets are transferred.
• Wills usually need to go through probate (a public process) while trusts don’t.
• Wills aren’t activated if the estate owner becomes incapacitated somehow, only after their death. Trusts are active once funded.

How Do I Choose Between a Will and a Trust?

The answer to that is: It depends on various factors, including the size and complexity of your estate and your relationship to your beneficiaries. That said, it’s crucial to understand that this doesn’t have to be an either/or situation; often, estates use both wills and trusts to accomplish their goals. That’s because each has pros and cons, or things one can do that the other can’t.

Pros and Cons of Wills

Pros:

• A will is more likely to ensure your wishes are granted than dying without a will, known as dying intestate. In the latter situation, the courts will determine the distribution of assets and only consider family members. If you want some assets to go to nonfamily members or charitable organizations, having a will is vital.
• A will is the best legal mechanism for assigning legal guardianship to any minors orphaned by your death. Note that trusts have no authority regarding guardianship of minors. If a will doesn’t exist or specify a guardian, the court will determine who the guardian will be, for better or worse. 
• A will can include your funeral preferences.

Cons:

• A will is not a private document. When the estate owner passes away, it will likely need to go through probate court, which is public. This means anyone could learn the value of the estate and the terms of the will. 
• A will may have more significant tax implications than a trust. There are many variables affecting that. 
• A will is often subject to creditors’ demands, meaning the estate may be allocated to pay off debts rather than to hand down to beneficiaries.

Pros and Cons of Trusts

There are multiple types of trusts, each with its own set of pros and cons. If you’re considering using a trust (and there are many good reasons to do so), it’s highly recommended that you work with an experienced estate planning attorney to find the trust(s) that best fits your needs. 

Pros:

• Trusts are private and usually don’t go through probate court. That means the general public has no access to any information about it. 
• Depending on the types or sizes of the trust, there may be positive tax implications. 
• Depending on the type of trust, the assets held in it may be exempt from creditors’ claims or lawsuits, making them popular with people whose careers frequently lead to litigation (doctors, lawyers, etc.). 

Cons:

• As noted above, a trust can’t legally mandate guardianship of orphaned minors. That may only be done through a will. 
• A trust can’t provide funeral preferences. 

Because of the pros and cons of each, it’s common for individuals to create both a will and trust for  a complete estate plan. That helps ensure the estate is well-planned, covering many bases and creating some privacy for the owner where necessary. 

Can a Will or a Trust Be Challenged in Court?

It’s possible for either, although it doesn’t happen frequently. Similar grounds could be used to challenge a will or a trust. In general, the person challenging either must have some logical grounds to do so, not just be annoyed that they didn’t get what they thought they should. Only those who have an interest in the assets are allowed to challenge, meaning anyone who is named as a beneficiary, is the heir of the deceased, or creditors (but again, some types of trusts are exempt from creditors). The reasons someone can contest a will or a trust include:

• Lack of mental capacity. If the person whose assets are addressed in the will or trust was deemed not of sound mental capacity, the assets may not be distributed according to their wishes. This may include someone who struggles with dementia or alcoholism/drug problems.
• Suffered undue influence or fraud. Sometimes, others take advantage of the elderly and convince them to change their will or trust to benefit the swindler rather than the honest beneficiaries. Court challenges can help determine if this was the case or, as also happens at times if the will was forged.
• Multiple wills. This may occur when someone dies while updating their estate plan. In many cases, the court will go with the most recent version.
• Invalid will or trust. If the will or trust is not written, signed by its maker in the presence of two witnesses who aren’t named in the estate plan, and signed by the witnesses, the plan may be invalid. 

What Should I Do if I Need to Begin Estate Planning?

Call Cava & Faulkner at 916-685-1225 for a free consultation. Every estate is unique. It’s best to work with experienced, knowledgeable estate planning attorneys who can go through the specifics of your estate to help determine what tactics and tools could have the best results for your estate and beneficiaries. We understand how vital it is to you to come up with a plan that meets your needs and wishes as closely as possible.

What Happens to International Property in a U.S. Estate Plan?

Not surprisingly, many high-net-worth families have property in other countries that they want to account for when they plan their estates. This situation is not to be undertaken lightly because it involves laws outside of California and the U.S. Any laws pertaining to estate planning, tax laws, and property transfer in the country where the property is located must be identified and followed, or the estate plan (or that part of it) may be invalid.

Accounting for California property can be complicated enough when estate planning, not to mention property in other U.S. states. Adding properties elsewhere makes it even more so. What comes into play is not just the ownership and tax implications but other aspects, such as the nationality of the owner (whether they are U.S. citizens, have dual citizenship with another country, or live in California but are foreign nationals).

Unfortunately, sometimes people think that if the property is in another country, they don’t have to worry about it when estate planning. That’s far from the trust, as many have learned the hard way. The U.S. takes estate planning, tax implications, and inheritances seriously, and so do many other locales.

Does Owning Property in Multiple Countries Cause a Need for Multiple Wills?

That depends on many of the factors described above, but yes, it’s possible that more than one will could be needed to protect all international property fully. Depending on the other countries involved, one will might be enough, but it’s highly advisable to work with an experienced estate planning attorney to determine what’s the right approach for your estate.

If multiple wills appear to be the best approach, having your U.S. attorney coordinate with counsel from other countries might be valuable to ensure all requirements and laws are followed. There’s also the possibility of having wills drawn up in the other countries’ primary languages, which could help ease the distribution of assets and probate-type procedures.

However, it’s vital to understand that when multiple wills are involved, it’s crucial that they be in sync with each other and follow the rules of each country, or some of them could be found invalid. In some cases, the foreign property can be dealt with as a supplemental will (such as a codicil to the first will). In other cases, carefully wording each will to clearly refer to other wills can avoid problems with wills being declared invalid.

What Is Ancillary Probate?

Ancillary probate is the term for the proceedings that may be needed when probate happens across more than one jurisdiction, such as owning property in states or countries other than where the estate owner lived. Technically, the property in those other locations is under the jurisdiction of that location, not of the U.S. home.

This can cause increased time and expenses for the beneficiaries, as multiple attorneys may need to be hired, a will’s executor will have more work to do (and if they’re being paid, they’ll earn more), and the different courts involved may not agree with each other on how the property should be distributed to the inheritors.

Is It Possible to Transfer Foreign Properties into a U.S. Trust?

It’s possible, but considerable research and time are required to verify whether every country involved recognizes trusts. Many countries don’t. Suppose the foreign property in one of those countries is placed into a U.S. trust. In that case, it can cause problems, including higher taxes or difficulties, with the ownership of the foreign property transferred to the beneficiary named in the trust.

What About Using a Foreign Trust?

Some countries offer foreign trusts. Those trusts aren’t subject to U.S. jurisdiction. However, they do offer the opportunity to use a trust, which is often a less time-consuming and costly way to transfer property to beneficiaries. They can bypass probate court and possibly offer some tax savings. They also offer better protection against creditors and other claimants to the estate. They may also offer protection from divorce claims, civil actions, or forced or false inheritance claims. That isn’t necessarily because foreign laws protect the trust from claims but because the cost and difficulty of pursuing legal measures outside the U.S. can be prohibitive. It’s also good to know that some countries are willing to enforce criminal cases and convictions from the U.S. if they involve a trust.

There are downsides and concerns to foreign trusts as well. U.S. trusts are protected by U.S. laws that don’t apply in other countries, so there may be little legal recourse if something happens to the foreign trust. Government stability is another significant factor. Anytime a country undergoes a change in government, relevant laws may change, and not always for the better.

Foreign trusts may also be subject to taxes, including from the IRS. These are all situations that should be discussed with your estate planning attorney.

What Should I Do if I Own Property in Multiple Countries and Need to Begin Estate Planning?

Call Cava & Faulkner at 916-685-1225 for a free consultation. International properties can add a layer of complexity to an already complex estate. Our team of experienced, knowledgeable estate planning attorneys can go through your property holdings to identify what countries are involved and what laws might be applicable. These are situations that require the utmost attention to detail, and our firm will endeavor to ensure every detail is accounted for.

What Are Some of the Recent Changes in Tax Law That Affect Estate Planning?

It’s easy to think of tax law as a centuries-old tradition where change is glacially slow. There’s some truth to that, but it’s also true that there have been changes in laws recently that affect estate planning, especially for high-net-worth individuals who are interested in paying as little estate tax as possible. While California itself doesn’t have estate taxes, the federal government has several that can become costly, especially as the laws change over the next year or two. Currently, the federal estate tax starts with estates valued at $13.61 million or higher (for 2024) for individuals or twice that for married couples. 

In the fall of 2023, the IRS announced a program to target high-income earners who are thought not to be compliant in filing and paying taxes. That means scrutiny is increasing for those with high incomes. This comes at a time when the 2017 Tax Cuts and Jobs Act, which doubled the federal estate tax exemption, is set to expire at the end of 2025. Congress could vote to extend the Tax Cuts and Jobs Act, but it’s not clear if they will. If they don’t, the threshold for estate taxes will drop from the minimum $13.61 million or higher listed above and could become as low as $5-6 million per person.  

So it’s worth considering taking specific actions before the Tax Cuts and Jobs Act expires in 2025, if it does.

Consider Creating a Spousal Lifetime Access Trust

A Spousal Lifetime Access Trust (SLAT) is an estate planning tool known as an irrevocable trust. That means assets are placed into the trust’s ownership and can’t be changed once the trust is finalized. The trust is set up to benefit the spouse of the person who set up the trust, who can benefit from the trust even while the original asset owner is still alive. Currently, the amount that can be placed into a SLAT without incurring a gift tax is $13.61 million. The other benefit of a SLAT is that the money placed there reduces the remainder of the couple’s estate, potentially lowering estate taxes on the assets outside the trust. 

Gifts for Children

Another way to potentially bypass steep estate taxes is to transfer assets as gifts to your children or grandchildren. The federal government does have a gift tax, but there are several exceptions. 

It’s essential to understand what the IRS considers a gift, which includes:

• Assets (stocks and bonds, etc.)
• Financial accounts (bank, retirement, or investment)
• Jewelry
• Loans with no or low interest
• Physical property (real estate, vehicle, etc.)

Suppose you’re unsure where your assets fit in terms of being subject to a gift tax. In that case, it’s highly advised to work with an experienced estate planning attorney who can help you identify what is or isn’t a gift and what might be done to avoid estate or gift taxes when transferring it to others. 

Each year, the IRS names the annual gift tax exclusion, an amount that, if not exceeded, can be given as a gift. In 2024, that amount is $18,000 per gift recipient. The amount is doubled if a husband and wife are giving the gift jointly. This is an amount that can be done annually.

However, it’s vital to understand that if the amount exceeds the annual gift, the IRS will view that as reducing the amount available in the lifetime cap (currently $13.61 million). When the lifetime exemption is exceeded, the tax rate could be as high as 40%. It’s best to talk to an experienced attorney about how to manage these gifts with as few repercussions as possible. 

Move Assets into Trusts

The larger the estate, the more likely it is to be subject to estate taxes, which can be sizable and reduce the value of the estate for the inheritors. One tactic to consider is creating a trust. That could allow you to reduce the size of the taxable estate by moving assets into the ownership of the trust rather than the person behind the estate.

However, there is an important consideration that shouldn’t be ignored. There are many types of trusts, with most falling into one of two categories: Revocable and irrevocable. Each comes with its own set of pros and cons.

• Revocable trust. As the term implies, this type of trust may be changed or canceled at any point when the person who created the trust is still living. That clearly provides flexibility, but if the trust generates any income while the creator is still alive, that will be considered taxable income to them.
• Irrevocable trust. This type of trust cannot be changed or canceled once it’s finalized, which can be concerning. However, this type of trust is more likely to be shielded from some or all estate taxes, depending on what’s contained in the trust and its overall value.  

How Can I Learn About Tax Law Changes That May Affect My Estate in California?

Call Cava & Faulkner at 916-685-1225 for a free consultation. Tax law and estate planning are both complex subjects, even more so when they intersect. There are many tactics for handling estate planning while managing taxes. Every estate is unique, and there’s no one-size-fits-all approach to creating an estate plan. Our team of knowledgeable, experienced estate planning attorneys can walk you through your estate and help determine the best approach to protect your assets for the next generation.  

How Does Owning a Small Business Affect Estate Planning?

Estate planning can often be complicated, but even more so when a small business is involved. People who have created and nurtured small businesses are justifiably proud of what they’ve accomplished. Still, they also want to ensure the business continues as long as it can, including after the founder has passed.

That’s why developing an estate plan is even more important than it usually is when the individual has a small business.

What Happens if a Business Owner in California Dies Without a Will?

Dying without a will is known as dying intestate. Under California law, if a business owner dies
intestate, any business assets will be distributed similarly to private assets. This is the order of succession.

• The spouse inherits it all if there are no children, parents, siblings, nieces, or nephews.
• The children inherit everything if the spouse is no longer living or married to the business owner.
• The spouse and children inherit in different proportions depending on the number of children.
• If the spouse and the owner’s parents or siblings survive, but there are no children, they’ll each receive portions of the estate.
• If the owner’s parents or siblings are the only survivors, they’ll inherit everything.

In some cases, family members would be the intended beneficiaries anyway. But there are many cases where the small business owner has reason not to want specific family members involved in the business, or they may prefer to leave the business to someone outside the family. Those wishes won’t be addressed if the business owner dies intestate.

Is a Will All I Need to Plan an Estate with a Small Business?

A will is a good start and, depending on the overall makeup of the estate, a will may be enough but as a rule, generally not. Other estate planning tools,, specifically a trust, is generally necessary to guarantee the outcome the business owner wishes to achieve. Every person with a business has a desired outcome, and along with this unique challenges. Here are a few of the tools that might help to determine what might work best for your estate and small business, Its vital that you work with an experienced estate planning attorney who will thoroughly discuss these tools with you.

• Life insurance policy. People often think the role of a life insurance policy is to provide financial assistance for a remaining spouse or children. But it can play another role, too–it can provide money for the family to help them if the business’ ownership changes, if they lose access to income from the business after the owner’s death, or it can be used to buy out another owner’s share.
• Trust. A trust is a way of placing the estate’s assets, including a small business, into a different type of ownership managed by a trustee. The advantages are that assets in a trust bypass probate court, so it can be less costly and time-consuming to distribute them. In terms of the small business, it can also set up the process of naming the business’ successor or require shareholders to vote unanimously to take specific actions, such as selling the business.
• Buy-sell agreement. This is a useful contract that determines ahead of tiem how one owner’s share of the business may be handled if they retire or die.
• Financial power of attorney (POA). This is a vital document for a small business owner. Unlike the above tactics, which primarily come into play when the owner dies, a financial POA is designed to go into effect if the owner becomes incapacitated in some way, meaning they’re still alive but unable to make decisions. The POA determines who the owner wants to handle their business dealings while they’re unable to. Without this POA, a business can be left unattended while other stakeholders go through court to try and gain control.

What Is a Business Succession Plan?

A business succession plan is a tool for small business owners that acts almost like a will. It sets up how the business will be handled, who will receive the business and who will run the business should the current owner become incapacitated, retire, or die..

A good business succession plan covers what happens to the business once the current owner is no longer part of it. This is a plan that is best undertaken with the assistance of an estate planning attorney as it’s complex and varies from business to business. In general, you should expect to cover:

• Ownership transition. To whom the business will transfer ownership and how that transition will happen.
• Structure. How the business should remain structured or how it should change when ownership changes.
• Future plans. If the current owner has ideas for the future they want to suggest, those can be included here.

These considerations are only a small sample of provisions you may include in your plan. However, a succession plan helps prevent disputes among stakeholders, potentially prevent severe negative, unexpected and un-planned tax consequences, and opens up conversations with the stakeholders to set expectations.

What Should I Do if I Need Help Incorporating My Small Business into My Estate Plan?

Call Cava & Faulkner at 916-685-1225 for a free consultation. We understand that while every aspect of your estate is vitally important to you, the small business you built may have a special place in your legacy. Every estate is unique and needs its own plan based on what the estate contains. Our team of experienced, knowledgeable estate planning attorneys can guide you through your estate and your small business and advise you on what might be the best way to protect both.