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Valerie Farris Oman
Seattle Small Business Lawyer
Seattle, Washington
Greatly helpful
out of 10
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Failing to Plan is Planning to Fail

What is estate planning, and how can it affect your small business?  Learn basic estate planning terminology, along with why it's important to address these issues.  Actively pursue balance and integration between your business plan and estate plan - starting here.

Written Feb 12, 2008, read 3835 times since then.


A wise soul once said, "Failing to plan is planning to fail." The majority of Americans are, unwittingly, on the road to "failure" with respect to estate planning. Estimates vary, but at least half of Americans don't have a will. The most common reasons for this are avoidance (I don't want to think about dying) and incorrect assumptions (I don't need a will because I don't have a lot of money/assets). Some folks just don't know where to begin; what's a will? Do I need one? Why? Who can I talk to about my questions?

Whatever reasons you have for avoiding this crucial topic, I hope to prompt you to action and give you some of the tools you need to make estate planning a priority. This article is not meant to provide legal advice for your particular situation, but to offer general information that will get you started down the right road.

Estate Planning Terminology

Let's start with the basics. Many of the people I meet do not understand the most fundamental estate planning terms. What is a will? Do I need a trust instead? What's the difference?

A will is a legal document that details how an individual desires to dispose of his property after he dies. Every state has different guidelines for what constitutes a valid will. For example, some states allow simple, handwritten wills, while others require more formalities in order for a will to be considered legally effective.

A trust is an entity created by a settlor - one who "settles" property in trust for a beneficiary. The trust is administered by one or more trustees according to the guidelines of the trust document, which can be very specific or intentionally vague. The settlor and trustee can be the same person. For example, if you have children and your parents set aside money for your kids, your folks may create a trust for the benefit of your children over which you have control for a period of time. In that scenario, your parents are the settlors, you are the trustee, and your children are the beneficiaries.

Additional circumstances in which a trust can be useful are when an estate is large enough to be subject to estate taxes, or if you have reason to avoid probate. Using a revocable trust, you might transfer the ownership of your house, car, and any other valuable assets to the trust. During your lifetime, you act as trustee and administer the trust to your own benefit. Once you pass, another trustee - chosen by you - takes over administration of the trust. In this manner, you control and benefit from your property while alive, and your trustee carries out your wishes once you are gone.

A few other estate planning terms to know:

* Power of Attorney: A document where the principal (the person granting the power) gives an agent the authority to act on her behalf. A power of attorney can be as narrow (i.e., power of attorney with respect to health care decisions only) or as broad as you desire.

* Health Care Directive (or, Living Will): A legal instrument, witnessed and notarized, detailing the author's wishes with respect to the course of treatment to be taken by health care providers should the principal be incapacitated or otherwise unable to give "informed consent." Health Care Directives deal with questions including whether the author wishes to receive artificial nutrition and hydration in such circumstances.

* Intestate: When someone dies without a will, they die intestate. Intestacy statutes govern what happens to your property if you die without a will.

This is by no means a comprehensive list of terms, or an exhaustive article on the topic of estate planning. It simply presents you with a starting point to understand what estate planning is all about, and why it should matter to you.

How Does this Concern my Small Business?

How does your corporate structure affect what will happen when you die? Do you want your business to continue to operate once you are gone? If not, who do you have in place to close-up shop? If so, how will that happen? Who will run the business? Will the structure remain the same? Chances are you haven't thought about these questions; or, if you have, you are stuck on what the right answers might be.

Owning a small business will affect your estate planning needs. Your estate plan will affect your business, either now or when you pass away. That interaction is a fact; your ability to control how the two relate is a direct result of how much time, thought, and effort you put into the structure of both your business and your estate plan.

There are at least two professionals you should consult when starting a business, as well as when you are making decisions about corporate structure, business continuity, and estate planning. They are a knowledgeable attorney and a good CPA. Both should have experience with corporate formation, the tax implications of starting and owning a business, and estate planning. Both should take the time to understand you. Not your business and your circumstances, but you as a person. Without that level of personal understanding, they will be unable to make recommendations that truly account for your way of living and doing business. What's more, they won't know the values that drive you, both personally and professionally, and therefore their advice won't be a good fit.

How to Find the Right Lawyer

When interviewing prospective lawyers, be sure to sit down and get to know them a bit. I'm a big proponent of the importance of building relationships in business. If you can tell within ten minutes of meeting a prospect that you really annoy each other, you shouldn't work with that lawyer no matter how experienced she might be! Crafting your estate plan in a way that works best for you as an individual and a business owner will take lots of time together - you need to find someone with whom you can establish some personal rapport.

Next, ask some practical questions. How long have you been practicing? Do you charge on an hourly or flat-fee basis? Do you have any referrals for me as I search for a good accountant? How long will it take to complete my estate plan? What are my responsibilities as a client in this process? The answers to all of these questions will give you a good feel for how each attorney works, and whether you can work together in addressing your estate planning needs.

Finally, remember that this is a chance for you to interview each other; it's not a one-way street. You might choose for any number of reasons not to hire a particular lawyer. They might also choose not to work with you. In business, these decisions are routine and should not be taken personally - or lightly. Make sure you "sleep on it" - take some time to really consider your decision, rather than hiring someone on-the-spot. Finally, trust your gut - if something is telling you this is (or is not) the person for the job, and the greater weight of your research supports that decision, go for it.

Conclusion: For God's Sake, Do Something!

You may have heard that ostriches have a habit of burying their heads in the sand. I suspect we've all met one or two people who act like an ostrich when uncomfortable situations present themselves. I will confess to feeling tempted towards this myself, at times - I'm sure we all have. Yet we also know that ignoring problems does not, sadly, make them go away. So take your first step towards digging out of that hole, and moving towards the creation of a winning business plan and a successful estate plan. Decide today to actively pursue balance and integration between the two, and the peace of mind you will enjoy as a result.

Learn more about the author, Valerie Farris Oman.

Comment on this article

  • Brand Specialist • Creative Director • Founder 
Redmond, Washington 
Brandi L Pierce
    Posted by Brandi L Pierce, Redmond, Washington | Feb 16, 2008

    This is the type of writing style that urges me to rate an article positively. Very well put!

    I have RSVP'd for your event, which I believe will be very helpful on my newfound road out of small business infancy to adulthood. =)

  • Inspire Action 
Bellevue, Washington 
Debbie Whitlock
    Posted by Debbie Whitlock, Bellevue, Washington | Sep 03, 2008

    Valerie - spending some time here this morning reading archived articles and am so glad you took the time to put this piece together.

    In my practice - sadly - I receive at least one referral a month where the husband has died and the wife is left trying to piece it all together - and there was no will.

    Your article addresses the points I make with my clients regularly - avoidance and who do they talk with.

    You made me laugh with the bold For God's sake do something point - keep up your great work.

  • Seattle Small Business Lawyer 
Seattle, Washington 
Valerie Farris Oman
    Posted by Valerie Farris Oman, Seattle, Washington | Sep 03, 2008

    Brandi & Debbie,

    Thanks so much for your positive feedback and comments! I continue to be amazed at how many of us avoid dealing with difficult issues because...well, they're difficult. The problem is, difficult issues only get worse with neglect!

    Here's to tackling the tough stuff!


  • Financial Representative 
Bothell, Washington 
Andrew Schell
    Posted by Andrew Schell, Bothell, Washington | Sep 19, 2008

    Valerie is passionate in her profession with a warm personality, she is articulate, knowledgeable and looks after her clients best interest.

    This is why I refer clients to her.