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The Business and Loved Ones Without You? Good Planning Makes Good Sense

Filed under Finance.

Every so often a famous person’s will makes headlines. Not too long ago, debates and commentary surrounded the publicized will of the late James Gandolfini, the late actor who portrayed the Tony Soprano character on "The Sopranos."

Questions surrounding potentially millions due in taxes left many wondering if the beloved actor knew of potential taxes and proceeded anyway, or whether different steps could or should have been taken to reduce taxes. In any event, the posited questions highlight the impact of estate tax planning on the post-death distribution of one’s estate.

Nontax reasons also exist for planning in advance, especially for business owners. These reasons exist even for those who are less-than-wealthy or who are currently "in the red."

Without appropriate planning, if one partner passes away, remaining colleagues may find themselves "doing business" with spouses and children. Further, heirs could be left with illiquid ownership interests, but not enough cash on hand to pay estate-related expenses or any taxes and fees when due. Also, the sudden loss of a salary being earned from the business could mean loved ones are unable to pay current living expenses.


Buy-sell agreements are commonly used among business owners to avoid these and other harsh results. Also, life insurance may be an option for buying out business associates, replacing "breadwinner" earnings, covering taxes, providing funds for children, etc. Because planning is unique to each individual’s situation, consult your advisor about planning options that could be the right fit for your needs.

Significantly, events such as a health crisis, sudden accident, death or disability are often very challenging and stressful for all involved, even in families with good relationships. Loved ones are faced with emotional issues, practical challenges, and financial questions. Failing to plan leaves loved ones facing a multitude of issues on their own.

Think Ahead

A significant part of "planning" could be thought of as "providing." With appropriate planning, you are providing guidance and direction for family and close friends. Having your plans in place could be very helpful to loved ones if they ever have to suddenly endure stressful challenges.

Although the details vary among the states, here are the basics on some documents commonly used in one’s estate plan:

  • Health Care Power of Attorney
  • Property Power of Attorney
  • Will
  • Trust
State law may require some or all of these forms to be notarized, witnessed, or to meet other requirements. Except in the case of certain types of trusts, these forms are generally revocable -- meaning you can change your mind, or "revoke" later.

Health Care Power of Attorney and Advanced Directives

Although the details vary by state, a health care power of attorney (POA) form generally specifies an individual (called your health care agent or agent) who may make your health care decisions for you. The many types of decisions that may be made include, among other things:

  • "Pull the plug" decisions and withholding of life-sustaining treatment
  • Admission or discharge from a hospital, home or other institution
  • Consent to medical treatments
  • Instructions to refuse certain types of medical treatment

Depending on the state, the document may be called a "durable health care power of attorney," "health care proxy," a "health care surrogate designation" or a similar name.

Think Ahead

The health care POA is designed to take effect during life, not after death, such as when you are not able to make health care decisions for yourself. This could happen in situations such as sudden health emergencies, long-term diseases, or decline during advanced age. It is important to choose someone you trust and who can handle this kind of responsibility.

Other types of health care advanced directives, such as a Living Will, may be used in an estate plan too. A Living Will generally specifies the kinds of medical care or treatments you want -- or do not want -- in case you are ever unable to make your own decisions.

Think Ahead

Planning for how to fund possible long-term care needs should also be considered. In some cases, long-term care insurance may be appropriate.

Property Power of Attorney

Similar to a POA for health care, a power of attorney for property generally specifies the person who may handle your finances. Typically, the designation covers a broad spectrum of assets, including:

  • real estate
  • personal belongings
  • financial accounts
  • business operations
  • litigation
  • insurance
  • safe deposit boxes

Some forms have an "any and all other" catch-all category aimed at covering any assets not listed in the form. You may also be able to specify certain assets that are not covered. Excluding items is best done by a very experienced and competent legal professional.

Think Ahead

Like the health care POA, a property POA is also designed to take effect during life, not after death, such as when you are not able to make decisions for yourself. It is important to choose a financially competent, trustworthy person.


A will is generally a document specifying who gets your property upon your death.

Think Ahead

In contrast to the health care and property power of attorney designations, a will governs the distribution of property after death, not during life.

In many states, a will is not valid unless specific requirements were followed. For example, a state may require that the will be signed in the presence of two unrelated witnesses, or that it be notarized or meet other requirements. If the specific requirements are not satisfied, the court will not follow the terms in the will.

Dying without a will is called dying "intestate." If this happens, state law generally provides default rules that specify who receives assets. A valid will essentially overrides the government-provided default.

Wills do not cover every type of property, though. Types of "nonprobate" property that a will typically does not cover include:

  • Jointly held property (joint tenants with right of survivorship (JTWRO))
  • Life insurance
  • Assets held in trust


With a trust, a "trustee" holds assets for the benefit of others, who are called the "beneficiaries" of the trust. The trustee manages the assets of the trust, but the beneficiaries are the ones who benefit from the assets.

The trustee is typically a bank, financial institution, or financially capable individual. The beneficiary, such as a spouse, child, or close friend or relation, may receive income that the trust assets generate, a portion or all of the assets themselves, or a combination of both.

A trust may be revocable, meaning it can be changed or revoked at just about any time. Or, it may be irrevocable, meaning that it generally cannot be revoked or changed.

Think Ahead

A trust arrangement may be used during life or upon death. Often, a trust is set up during life by the "settlor" (who creates the trust) and it continues even after the settlor’s death. Some states allow dynasty trusts which may continue forever (in perpetuity).

Trusts can be useful in providing for financially inexperienced or immature loved ones. In many cases, trusts can help achieve asset protection purposes by preventing creditors of beneficiaries from reaching trust assets. Trusts are also typically used in tax-planning strategies.

Work Smart

If someone dies without any planning, state laws generally provide a default distribution. This default is typically based on blood relations, regardless of whether you had a good, bad, or indifferent social relationship with a relative. Also, it typically excludes friends no matter how close of a relationship you have with them.

By using a will or a trust, you can "override" the government-provided default and specify the people you want to benefit. This includes relations and non-relations such as a close friends, or business associates.

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