Family Land or Businesses
If your family owns multiple items of real estate, land, land interests (mineral rights, etc) or a business or businesses, very carefully scripted language must be included inside of your estate plan.
Here’s a real life example to illustrate why pre-planning land benefits is so important. A family of four siblings came to us, shortly after their father had died. There had been very little done in the way of estate planning. The father had left 800 acres to them, to be split equally. Of the 800 acres, one acre had a ranch house, the other 799 was raw land. Each of the four kids had different lifestyles, and differing thoughts on responsibility and money spending. One sibling wanted to keep the land intact and not divide, to increase value over time and keep it in the family. One sibling wanted his 200 acres sectioned off, so he could develop as he wanted. One sibling was only concerned with living rent free in the house, and the other sibling just wanted to sell their portion and get cash as quickly as possible, with arguing about how much the land per acre was worth. Obviously there was quite a bit of conflict, with no plan to go forward, and any progress towards distribution had to be approved by all 4. Family strife took place. Had the father left instructions on who got what, or how it was to be handled, all of this family strife and stress could have been prevented.
Another concern is the location of land. Probate must take place in the state the land is located. If assets are owned in multiple states, it can create unwanted issues without a properly set up estate plan.
If you own a business, it is important to decide ahead of time (before incapacitation or death), if you want to keep the business in the family. Is it a specialty service, that once the primary skilled craftsman is incapable of working the business will have to close? Is it a business that the family can continue operating? There are many wrinkles to complicate this, number one being if it is a jointly owned business. If there is a business partner, does the healthy partner take over and buy the family’s share or does a beneficiary family member step in to run it with them? If there is no plan in place, it can lead to chaos, most likely the eventual closure of the business, with constant arguing over rights to property and profits. Addressing these concerns ahead of time is called Business Continuation Succession Planning. With a properly drafted estate plan in place, there can be a smooth transition and preservation of value.
Benefits of pre-planning business succession:
- Prevent constant arguing
- Prevent chaos
- Set rights in place
- Maintain profits
- Have a game plan
- Proper property control
- Continued operations
- Maintain sell-able business value
Business and Land Evaluation
When it comes to land and/or businesses, putting an accurate value on them can be challenging, especially for heirs who have not directly been involved previously. For example, does a business get evaluated according to it’s worth, accounts receivables, profits, reoccurring revenues, intellectual property, patents, the employee talent and skills, stock price, etc? It’s the same with real estate. In reality, real estate is only worth what someone will pay for it, during the time frame the seller wants to sell it. Things can always sell cheaper quickly, but waiting for a more mature solid value may take time. Having a plan in place, so there is no arguing among shared beneficiaries, will prevent much future frustration for everyone involved. Let us show you how to preserve family assets.
Pre-plan to protect your:
- Intellectual property
- Real estate