Should I Include a Business Trust in My Estate Plan?
When creating a thorough estate plan, it is essential to account for the unique objectives and goals specific to your situation. For business owners, safeguarding your business interest within your estate plan is paramount. Among the various options available, establishing a business trust stands out as a popular choice. Determining the best approach for integrating your business into your estate plan, however, should always be accomplished with the assistance of an experienced estate planning attorney. In the meantime, the Indianapolis attorneys at Frank & Kraft discuss what to consider when deciding whether to include a business trust in your estate plan.
Understanding the Concept of a Business Trust
While you may already be familiar with trusts in the context of individual or family assets, a business trust serves a distinct purpose. Similar to other trusts, a business trust involves appointing a Trustee to oversee assets, which in this case includes the business itself or your stake in it. Depending on the trust’s structure, it can delegate authority for managing your business interest and its day-to-day operations. There are three primary types of business trusts:
- Grantor Trust: Offering simplicity, the Grantor maintains full control over the trust, including its distributions and tax obligations.
- Simple Trust: This trust mandates direct distribution of business profits to beneficiaries while safeguarding the principal assets.
- Complex Trust: Managed by a trustee, this type of trust allows for various uses of profits and assets beyond direct beneficiary distributions, such as charitable contributions.
What Are Some Benefits of Creating a Business Trust?
Incorporating a business trust into a business succession planning component within your estate plan can yield several important benefits, including:
- Tax Avoidance: Strategically structuring a business trust can help to minimize estate taxes and facilitate tax-efficient wealth transfer, optimizing asset distribution and mitigating the tax burden on your estate.
- Protecting Your Assets: A business trust can shield business assets from creditors and legal liabilities, ensuring their preservation for future generations and securing your legacy against unforeseen challenges.
- Continuity of Operations: One of the reasons to include a business succession planning component in your comprehensive estate plan is to ensure that your business not only survives but thrives in your absence. A business trust can help ensure seamless succession planning for family-owned or closely held businesses, preserving your legacy and guaranteeing the continuity of operations for generations to come.
- Keeping Your Estate Plans Private: Maintain confidentiality in estate administration by bypassing public probate proceedings through the use of a business trust. Your business trust can provide discreet asset distribution and protect sensitive business information.
- Flexibility and Customization: Like all trusts, a business trust can be tailored to meet your specific needs, including preferences in asset management, distribution schedules, and beneficiary provisions, providing bespoke solutions to achieve your objectives effectively and efficiently.
Do You Need Help Deciding Whether to Incorporate a Business Trust in Your Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you need assistance deciding whether a business trust should be part of your overall business succession planning component within your estate plan, contact an experienced Indianapolis business succession planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.Read More! Latest posts by Paul A. Kraft, Estate Planning Attorney (see all)
