The title of this is a bit personal to me. Growing up, my family moved fairly often, and it wasn’t always by choice. It seemed everywhere we moved, my father made time for his passion – gardening. Something about salsa with home grown tomatoes and onions made him feel satisfied. But, whenever we moved, the garden, the orchard, and all the landscaping became for nothing. Now when we look at our former residences and see flourishing vegetation, it hurts a little knowing the fruits of our hard work are being enjoyed by someone else.
Family business and legacies are very much the same. When kept in the family and managed properly, the fruits of your labor are enjoyed for generations. When poorly managed, it can slip away and never be recaptured. On our podcast, “(Estate) Plan For The Worst and Hope For The Best!” we brought in Jeff Stephens, Partner at GVM Law, for his insights on how his firm handles estate planning and guidance, specifically for the vineyard and winery owners in California. His firm understands the gravity and sensitivity involved with a family business and how poor estate planning can topple a brand, company, and the family’s opportunity for generational wealth.
Jeff brought up two critical matters during our conversation:
State Jurisdiction – This can impact your estate plan in 2 major ways.
Privacy – You may have concerns about privacy, taxability, and longevity of setting up a trust, BUT have you looked at other states’ jurisdictions? You don’t necessarily need to be a resident in a state to set up a trust and transfer assets to be owned and governed by that state’s laws. Jeff goes on to say that different states have individual advantages and alludes to the fact that it really comes down to the clients’ needs. What are your concerns, which states have laws that address your considerations and which company do you wish to work with, familiar with those laws? The successful outcome is living where you want to live but structuring your estate and legacy planning through a path most conducive to you!
Tax Strategy – This can have huge implications on the longevity and prosperity of a family legacy. Other states may have laws that allow for more tax favorable treatment in your estate plan. Finding tax favorable jurisdictions keeps the money within the family and improves the longevity of the estate. You can’t pick which tax laws you obey and disobey, BUT, much like my point regarding states’ jurisdictions, you can see whose tax laws are favorable to your situation.
Legal Definition or “Irrevocable” – this one is VERY important!
Irrevocable – Words have meaning, and this REALLY matters! The term irrevocable means it cannot be changed; however, ‘irrevocable trust’ means the trust may not be changed or terminated WITHOUT THE PERMISSION OF CERTAIN NAMED AUTHORITIES! I spent two and a half years working for a firm that administrated irrevocable employee grantor trusts (sounds riveting, I know), and there were times where we unwound (decanted) the trust. If an irrevocable trust comes into the estate planning conversation, one of the first things you should ask is, “How does this get undone, should life take a drastic change?” Irrevocable trusts can be very useful so don’t get thrown off because of the typical definition of ‘irrevocable.’
Let me make one thing clear: this is generally for large estates, family businesses, and complex planning. The vast majority of people DO NOT NEED complex plans. There are firms that offer simple estate plans, and a variety of DIY options can be found online. We are even seeing more and more options for cost competitive hybrid solutions, where you are guided through the estate plan process and it gets reviewed by an attorney, such as the option illustrated in the Tech Rolodex on our website.
Find what is right for you, don’t shy away from scary terms, operate in the best interest of your family, and allow your family wealth and legacy to grow. Because, much like a garden, you want to enjoy your own crop, not watch as others benefit from your hard work!
This information is provided for educational purposes. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.