The Intersection of Business Ownership and Estate Planning

At Cripps & Simmons we consider all of a client’s assets when doing estate planning, including any interests they may own in a business entity. Whether your interest is only as an investor, or you actively participate in a business, we want to know about it. Sometimes it’s easy to forget that a business is also an asset, (even if some days it feels more like a liability).

When we review the applicable business agreements (i.e., operating agreements, shareholder agreements, buy-sell agreements, etc.), we often find that these documents have been drafted either by the clients themselves (perhaps with a little help from the internet) or by business attorneys with little or no experience in estate planning. We want to be sure that any applicable agreements work well with a client’s estate planning.

For example, what are the restrictions on your ability to transfer your interest – either during your lifetime or at death? Can you own your interest in a trust? If you can, are there any restrictions on the terms of the trust? If an interest is owned in a trust, it can’t “die,” so does the agreement address this situation, or does it just talk about the death of an owner? Does the agreement allow for the non-probate transfer of your interest upon your death (i.e., TOD – transfer on death)?

Most agreements we review have buy-out provisions at death that require a personal representative be appointed to represent the interest of the deceased owner. In order to have a personal representative, a full probate estate is necessary and the personal representative is appointed by the Court. (Contrary to popular belief, being nominated or appointed in a Will does not make someone a personal representative. Only the Court can do that.) Most clients don’t want to go through probate at all. It’s disappointing to find out that the only asset that is requiring probate is their interest in a business.

So what can you do?

1. If you have a business document, read it.

• If it has already been signed by all owners, be sure to share it with your estate planning attorney. We can make recommendations for changes to coordinate with your planning; and we can assist in making the changes, if needed.

• If it has not yet been signed, consult with your estate planning attorney to be sure it works for your situation. If you don’t have an estate planning attorney, call us; we can help.

2. If you started a business, but didn’t bother to have any business document written, consider having it written by an experienced attorney (not your accountant or the internet). It’s worth the investment. (Note that limited liability companies with one member are required to have an operating agreement in Missouri.)

3. If you are just starting a new business, ask your business attorney to work with your estate planning attorney – or call us, we do both.

At Cripps & Simmons, we want to be sure our clients’ estate plans are comprehensive and tailored to their situation – including their businesses. If you’d like more information, call and set up an appointment with one of our attorneys.