Estates and Succession Planning - Essay Example

Estates and Succession Planning Name Date Course Dear Andy RE: Estates and succession planning As a carpenter, a succession planning will be important for you as it will enable you to clearly outline the individuals or individual that will take over your business. Since you also have other properties in the form of estate and you are managing the estate on behalf of your mother due her condition. Succession planning will be useful. Succession planning will enable you to choose the individuals that you would like to manage your business and properties in future or incase of death. As you have expressed you currently have a will and your first wife is named as the sole beneficiary, changes will be required. This is considering that you already have plans of marrying Rose Katrina Smith who is your current partner. It is important to note that succession planning is useful in preventing any future conflicts with regards to the inheritance. This is because it clearly lays out the plan for the succession and the specific individual that will be involved in the succession process. This is also useful in ensuring that the matter does not end up in court which may lead to the estate being divided among the people who do not deserve the inheritance (Ward, 2011). On the other hand, the court process has negative impacts o the will as part of the estate will have to be sold for the purposes of paying for the expenses incurred during the trials. The succession plan will be useful in avoiding problems and a burden to the family after death. Will and enduring power of attorney It is recommended that you make changes to your current will. In your current will, you have named your wife as the as the sole beneficiary. However, conflicts may arise incase of you will have to marry Katrina whom you intend to marry in 2015. The marriage could last for a long time and in case of death she will feel entitled to part of the estate. This will automatically lead to court battles with your first wife who is the sole beneficiary. Court battles will have a negative impact on the estate as the laws of intestacy may end up being applied and hence affecting the inheritance process. A will is also important in ensuring that the inheritance tax is reduced. It is also recommended to that you should talk to a lawyer for more information with regards to intestacy and inheritance laws. The will should also be updated for the purposes of choosing legal guardians for your children. This is considering that the children will require legal guardians after the divorce process is finalized. A will is also important as it ensures that one is able to choose their own executioners (Sonfield, 2011). This is also useful in ensuring that the beneficiaries will not have to incur extra expenses for choosing the legal executioner. A will is also important as it enables one to set up trusts that carter for how and when someone benefits. It is also important to note that the will plays an important role in enabling an individual to understand how much they are actually worth. It is also important to note that the presence of a will encourage succession planning. Succession planning is important in ensuring that the wealth is passed on but the control remains. It is recommended that you should consider succession planning in your business and some parts of your estate. As a carpenter, accidents may occur or you may not be able to perform some of the tasks after some years. This means has a negative impact on the business as it may lead to its closure. Succession planning will therefore be important in ensuring that you are still able to control the business while the management is passed on to someone else (Lam, 2011). It is recommended that you consider your children, your first wife or Katrina after getting married. Succession planning will also be useful in terms of motivating the children in future. It will also be possible to nurture the children and hence enabling them to carry out the duties effectively when they will be left on their own to manage the business. It is highly recommended that you consider the children in the succession planning for the purpose of ensuring that the business is able to continue even after your retirement and death. Most of the family businesses that have been successful have embraced the concepts of succession planning. The threats to family assets from a third party will also be eliminated due to the concepts of succession planning. This risk can always exist in the absence of a will and succession planning. The enduring power of an attorney is a legal authorization to act on behalf of someone else in a legal or business manner. Currently you have a joint enduring power of an attorney wit regards to the estate of your mother who is suffering from dementia and is at a nursing home. On the other hand, your first wife is also your sole attorney in your current enduring power of an attorney. However, it is recommended that you make changes for the purposes of avoiding any form of conflicts incases of in eventualities. It is recommended that you should also consider Katrina after the marriage as conflicts withy the first wife may arise in case of any in eventualities. On the other hand, it is also recommended that you should consider your children in future. Legally, an attorney must be 18 years of age or older. This will also be useful to the children as it will support the succession planning process. It is also important to note that the family members play an important role in the management of the family business (Ward, 2011). A sole attorney may not be effective as in eventualities may also occur and hence impacting negatively on the management of the business. It is therefore important to ensure that more than one attorney are in place. It is however recommended that you should continue acting as an attorney for your mother. It is also important to note that the laws gives an attorney powers to dispose the property of an individual and hence the need for choosing the right person. Assets and liabilities It is also notable that you have various assets which are under your name and some other assets may be transferred to you after the divorce with your first wife is finalized. Assets contribute to income tax after according to the taxation laws (Dobris, 2011). The amount of taxes to be paid is dependant on the amount of assets. This means that the more the assets the more the taxes. Transferring the assets to someone else has the potential of lowering the amount of income taxes to be paid. It is also important to note that after death some amount will also be paid as income taxes. It is the duty of every citizen to pay the income taxes depending on their assets. However, it is also important for you to ensure that your assets do not lead into a burden in terms of taxation. It is therefore recommended that you should considering transferring some of your assets to you wife or children in future. After the marriage with Katrina, it is recommended that you transfer some of your assets to her. It is also important to consider transferring part of the assets to your children when they attain the age of 18 years. However, it is also important to note that you will only be required to transfer a small part of your assets as you currently don’t seem to have more assets than you need. However it could be more after the divorce has been finalized or in future. It is also recommended that you should start making charitable donations. This is because the value of the estate which is a consequence of income tax and estate administration fees can be reduced through making charitable donations (Burroughs, 2010). Making charitable donations is not costly and it will not have negative impacts on your assets. However, it is recommended that you should make charitable donations that you can afford and depending on your income. The liabilities are also common and it may affect the distribution of your assets in future if they are not paid. Your family member may end up with a burden due to the liabilities that you have. This is because the estate may end up being sold for the purposes of paying for the liabilities. Currently it is evident that you have some liabilities in the form of unsecured loan from your father, a car loan and a house mortgage with your dad and your first wife. In the succession plan, you should indicate how you intend to pay for the liabilities so as to avoid inconveniences that may arise as the estate may end up being sold in order to pay for the liabilities. This means that the children and any other beneficiaries will not benefit from your estate after your death. However, the comparison between your assets and liabilities indicates that you can be able to manage the liabilities and hence reducing the risks of your assets being disposed for the purposes of paying for the liability. Family relationships The family relationship plays an important role during the process of succession planning. Most of the families end up in conflicts due to the lack of succession planning and hence straining the relationship among the members (Schröder, 2013). You case indicates that your divorced will be finalized soon and thereafter marry Katrina in 2015. It is recommended that you should consider the relationship between your first wife and Katrina. This will be useful in ensuring that the family relationship does not lead to conflicts. During the planning process the role that will be allocated to you first wife and Katrina should be dependant on their relationship. Some of the families have experience difficulties during the inheritance process due to differences between the family members. Although you had indicated that you do not plan on including Katrina in most of the inheritance issues, it is not a good idea. She will be entitled to some part of your estate after the marriage and failing to include her in the succession planning process will impact negatively on the process. This is because she may end up in court and hence leading to court battles and strained relationships. After the marriage Katrina will also have a legal right to inherit some parts of the estate. It is also important to ensure that you have established the relationship between yourself and your first wife. This is for the purpose of determining the role that she will play in the succession planning process. It is evident that your children are still young and none of them has attained the age of 18. This is considering that 18 years is the legal age that the individuals will be allowed to own properties and participate in the management of the estate. However, this does not mean that they should totally be excluded from the succession plan. The children play an important role in the family relationship and as such they should be involved in the succession planning. Most of the family business that has been successful has survived for ages due to the succession planning (Clifford, 2013). You should therefore consider including your children in the will for the purpose of preparing them to take over the management of the estate and the business once they are 18 years. However it is important to note that the children may end up in other professions or may not be interested in the family estate. Although this is possible, it is important to include them as it is their right. On the other hand, they may play an active role in the management of the estate while still undertaking other professions. This will be useful in ensuring that the family business continues to thrive. The success of the business will be dependant on the ability of involving all the family members including the children. However, it will be important for you to determine how each of the family members relates to one another and hence making the correct decision with regards to the succession planning. After the divorce has been finalized, the relationship with the first wife may not be good enough due to the separation and distance. It is therefore recommended that you seek the services of the family lawyer for the purpose of obtaining more information that will be useful for writing the will. The family lawyer is experience on the family issues and will be able to provide appropriate advice with regards to the legal issues that affects the family relations. It is also recommended that you should seek the advice of the family members with regards to some of the aspects of the estates. In this case, it is recommended that you should consult both your first wife and Katrina. This should tale place before the divorce is finalized an after the marriage with Katrina. This is because they are the only adults whom you have a direct and close relationship with and are entitled to part of your assets. The family relations are thus important during the process of succession planning and it can determine the success of the whole process (Bruining, 2010). It is also evident that you intend to give your estate to your father, should consider taking to him for the purposes of determining if he will be able to manage the estate or will require some assistance. It is thus important to consult all the family members who may end up becoming beneficiaries for the purposes of avoid any conflict or tension among them. Investment and insurance Investment is an important aspect of the succession planning. This is because it determines how the finances will be used in order to grow the available assets. It is recommended that you should seek the services of business professionals who are experts in the field of investments. They will be in a position to provide you with information with regards to the investments. The business professionals that you should consult include an accountant. An accountant will give you advise with regards to yours spending and also financial advise. This will play an important role in enabling you to fully understand your financial position and the figures can be used for the purpose of making future projections. The actual financial situation together with the projections can be used for the purpose of making decisions with regards to the succession planning and management of the estate. It is also recommended that you should seek the services of an expert in the field of commerce and marketing. The expert will be in a position to give to give you advice with regards to your investments (Palich, 2013). Your business projections can also be made by an expert in the field of commerce. This will be useful in determining the probability of success of your business. It is also important to note that the concepts of commerce will be important in ensuring that you make the right decisions with regards to your investment and hence developing a realistic succession plan that reflects your position and business needs. The concepts of insurance are important to you and your family. Insurance is important for the purposes of cautioning your business from risks and also ensuring that you and your family are compensated incase of any risks. Your profession as a carpenter has various risks that may impact negatively on you and your business. Risks may lead to the collapse of the business and hence affecting the succession planning as the beneficiaries will not be able to benefit from the business. It is recommended that you should obtain an insurance policy for your business. This will ensure that your business is secure and the beneficiaries will still be able to benefit incase of any risks. It also notable that you do not have a life insurance. The lack of an insurance policy has a negative impact on the succession planning process. The beneficiaries may not be able to benefit incase of your death due to risks. An insurance policy will be important in ensuring that you are able to benefit incase of injuries that may affect your health and force you to stop working. Incase of such an incident, you would be compensated and the insurance will take care of the medical expenses and hence reducing any burden that would have been placed on the family members and hence leading to an effect on the succession plan (Schwarcz, 2011). An insurance policy will also be important in enabling you to put in place measures that will ensure that plan is not affected. It is recommended that you seek the services of an insurance company for the purposes of obtaining detailed information with regards to the insurance policy for your family, yourself and your business. The insurance company will be able to provide you with advice regarding different aspects of the risks and importance of the insurance policy. On the other hand, it is also important to note that the insurance companies will be able to advice you the type of insurance that is suitable for you as the insurance policies have different rates (Himmelstein, 2012). From the information obtained, it is also evident that you are not aware of superannuation nomination. It is recommended that you consult a legal expert for the purposes of obtaining information with regards to superannuation nomination. The legal expert will be able to provide more information with regards to your eligibility. This is also considering that you are in the process of finalizing a divorce and you also intend to remarry in 2015. The succession plan requires the services of different experts and hence the recommendations that you should seek the services of different experts. Yours Faithfully References Ward, P, 2011, Self-help housing policies for second generation inheritance and succession of “The House that Mum & Dad Built”, Habitat International, 35(3), 467-485. Sonfield, M, 2012, Family businesses' succession planning: a seven-country comparison, Journal of Small Business and Enterprise Development, 19(1), 7-19. Lam, W, 2011, Dancing to two tunes: Multi-entity roles in the family business succession process, International Small Business Journal, 0266242610376357. Ward, J, 2011, Keeping the family business healthy: How to plan for continuing growth, profitability, and family leadership, Macmillan. Dobris, J, 2011, Estates and trusts: cases and materials, Foundation Press Thomson/West. Burroughs, L, 2010, A Strategy for Family Business Succession Planning, In Small Business Institute® National Conference Proceedings (Vol. 34, pp. 39-55). Schröder, E, 2013, Antecedents and consequences of adolescents' motivations to join the family business, Journal of Vocational Behavior, 83(3), 476-485. Clifford, D, 2013, Estate planning basics, Nolo. Bruining, H, 2010, Strategic changes in family firms post management buyout: Ownership and governance issues, International small business journal, 28(5), 505-521. Schwarcz, D, 2011, Reevaluating Standardized Insurance Policies, University of Chicago Law Review, 78, 1263. Himmelstein, D, 2012, Response to the Institute of Medicine's Recommendation that Cost Determine Insurance Policies'" Essential Benefits", International Journal of Health Services, 42(3), 571-573. Palich, L, 2013, Small business management, Cengage Learning. Read More