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Complex assets and specific legacy wishes are both frequently reasons that people decide to create trusts. Those with businesses might potentially fall into both categories. The company that they own and operate may be a very valuable asset.
They may also have specific plans for the legacy they leave for others, especially regarding the business. Business owners may find that creating a trust as part of their estate plan, often specifically to serve as the legal owner of the organization, can be a clever solution. There are many benefits to starting a trust when addressing a business in an estate plan.
What are some of the reasons a business owner might want to transfer ownership of their company to a trust?
1. To reduce estate tax risks
The more an estate is worth, the greater the chance that there may be estate taxes due when someone dies. In some cases, a successful business or professional practice could cost enough on its own to push someone over the threshold for estate taxes. For individuals who die in 2024, an estate worth $13.61 million or more could lead to estate taxes. Those with successful businesses may need to use a trust so that their estate isn’t at risk of estate tax rates as high as 40%
2. To prevent the dissolution of the company
Sometimes, people who run businesses want the company to last indefinitely. They want the organization to continue serving the community and providing competitive wages to its workers. Sometimes, estate beneficiaries may put short-term financial benefits ahead of long-term stability. They might sell a business that could continue to generate revenue indefinitely for a one-time windfall. Holding a business in a trust prevents beneficiaries from damaging, dissolving or selling the company.
3. To provide support with operations
The trustee who manages the business trust can perform crucial services for the organization. They can handle daily operations and manage the company’s resources. Trustees can play a particularly important role when the family members who may be beneficiaries of an estate do not have the skills or experience necessary to run the business on their own.
Specialized trusts created to protect a business can help an organization and also those who may benefit from its successful continued operations. A successful business owner may need to explore more complex estate planning tools as a means of protecting their legacy than most others. Contact us online or call today for a free consultation with Pennington Law, PLLC.
