Oops! Sorry!!

This site doesn't support Internet Explorer. Please use a modern browser like Chrome, Firefox or Edge.

Join Us

June 17, 2024

Best Practices in Estate Planning, Probate and Trust

Estate planning stands as a cornerstone of financial management, encompassing crucial decisions regarding asset distribution, healthcare directives, and the safeguarding of loved ones' futures. In parallel, choosing the right entity structure for businesses is paramount, influencing liability protection, taxation, and operational flexibility. In this comprehensive guide, we delve into the intricacies of estate planning and entity structuring, shedding light on key concepts and considerations for informed decision-making. This guide is created from the talk of Denny Woods of Reece Moore Pendergraft LLP when he appeared on Northwest Arkansas Commercial Real Estate Meet Up.

Here are topics that will be discussed:
• Introduction to Estate Planning and Entity Structuring
• Best Practices in Estate Planning and Entity Structuring
• Tax Implications
• The Role of Proper Documentation

Understanding the Importance of Estate Planning
Effective estate planning transcends the mere allocation of assets. It involves thoughtful consideration of healthcare directives, guardianship arrangements for minors, and contingency plans for unforeseen circumstances such as incapacity or death. Absent a clear estate plan, families may find themselves embroiled in disputes, facing undue delays, and burdened by unnecessary expenses during emotionally taxing times.

Exploring Entity Structures
Sole Proprietorships: Representing the simplest form of business ownership, sole proprietorships render individuals personally liable for all business debts and obligations.
Partnerships: Formed by two or more individuals who share profits, losses, and liabilities, partnerships operate based on mutual agreements and understandings.
Limited Liability Companies (LLCs): Blending liability protection akin to corporations with the tax advantages of pass-through taxation, LLCs offer entrepreneurs a versatile business structure.
Corporations: As distinct legal entities, corporations shield owners from personal liability but may be subject to double taxation on corporate profits.

Best Practices in Estate Planning
• Start Early: Begin estate planning as early as possible to ensure ample time for thoughtful consideration and implementation of strategies.
• Comprehensive Documentation: Ensure all essential documents are in place, including wills, trusts, advanced directives, and powers of attorney, to articulate preferences and facilitate smooth asset distribution.
• Regular Review: Periodically review and update estate plans to reflect changes in personal circumstances, financial status, and legislative regulations, ensuring continued alignment with evolving goals and objectives.
• Professional Guidance: Seek the expertise of legal and financial professionals specializing in estate planning to navigate complexities, optimize tax efficiencies, and mitigate potential pitfalls.
• Communication: Foster open dialogue with family members and beneficiaries to convey intentions, address concerns, and minimize the risk of misunderstandings or disputes in the future.

Best Practices in Entity Structuring
Clear Objectives: 
Define clear objectives and long-term goals for the business to inform entity selection and structuring decisions, considering factors such as liability protection, tax implications, and operational flexibility.
Tailored Solutions: Select an entity structure that aligns with the unique needs and circumstances of the business, balancing considerations such as ownership dynamics, growth aspirations, and regulatory requirements.
Proper Documentation: Establish comprehensive legal agreements, including partnership agreements for partnerships and operating agreements for LLCs, to delineate rights, responsibilities, and decision-making processes among stakeholders.

Risk Management
Prioritize liability protection by opting for entity structures that shield personal assets from business liabilities, minimizing exposure to financial risks and potential legal disputes. Tax Efficiency: Strategize for tax efficiency by considering the implications of different entity structures on taxation, exploring options such as pass-through taxation for LLCs or corporate tax treatment for corporations.

Best Practices in Probate
Understanding Probate Process: Begin by comprehensively understanding the probate process and its implications. Probate involves validating a deceased person's will, appointing an executor, identifying assets, paying debts, and distributing remaining property to beneficiaries. Familiarizing oneself with state-specific probate laws and procedures is crucial for efficient navigation.
Minimizing Probate Assets: Minimize the assets subject to probate to expedite the process and reduce associated costs. Strategies such as establishing trusts, designating beneficiaries on accounts, and owning property jointly with rights of survivorship can help bypass probate for certain assets.
Creating a Comprehensive Estate Plan: Develop a comprehensive estate plan that aligns with individual goals and circumstances. This includes drafting a clear and legally valid will, establishing trusts to manage assets and minimize tax liabilities, and preparing advance directives to outline healthcare preferences and appoint a trusted individual to make decisions in case of incapacity.
Regular Review and Update: Regularly review and update estate planning documents to reflect changes in personal circumstances, financial status, and legislative developments. Life events such as marriage, divorce, birth of children or grandchildren, and significant asset acquisitions or disposals warrant immediate estate plan revisions to ensure continued alignment with intentions.
Seeking Professional Guidance: Seek guidance from legal and financial professionals specializing in estate planning and probate. Experienced attorneys can provide personalized advice, draft legally binding documents, and navigate complex probate procedures, ensuring compliance with applicable laws and regulations.
Maintaining Detailed Records: Maintain detailed records of assets, liabilities, and important documents to facilitate probate administration. Organizing financial records, titles, deeds, insurance policies, and account statements streamlines the probate process, minimizes delays, and helps ensure accurate asset distribution.
Open Communication: Foster open communication with family members and beneficiaries to manage expectations and minimize conflicts during the probate process. Discussing estate planning decisions, intentions, and potential inheritance issues in advance promotes understanding and reduces the likelihood of disputes.
Consider Probate Alternatives: Explore alternative methods of transferring assets outside of probate, such as joint tenancy, beneficiary designations, and living trusts. These strategies can expedite asset distribution, maintain privacy, and potentially reduce probate expenses and estate taxes.

Best Practices in Trust

• Determine the purpose and objectives of establishing a trust, whether it's for asset protection, tax efficiency, or legacy planning.
• Choose the appropriate type of trust based on your goals and circumstances, such as revocable or irrevocable trusts.
• Carefully select a trustee who is competent, trustworthy, and capable of fulfilling their fiduciary duties.
• Properly fund the trust with assets and ensure they are titled correctly under the trust's name to maximize its effectiveness.
• Regularly review and update the trust documents and assets to reflect changes in your life and financial situation.
• Communicate openly and transparently with beneficiaries about their rights, responsibilities, and the purpose of the trust.
• Seek professional advice from legal, financial, and tax experts to ensure the trust aligns with your objectives and complies with relevant laws and regulations.

Emphasizing the Role of Proper Documentation
In estate planning, thorough documentation of properties ensures that assets are properly accounted for and distributed according to the individual's wishes upon their passing. This documentation typically includes deeds, titles, mortgage agreements, and any other relevant paperwork that establishes ownership and outlines any legal obligations associated with the property. Documents that you need to pay attention to are Last Will and Testament, and Revocable Living Trust. During probate, accurate property documentation is crucial for the orderly settlement of the deceased individual's estate. Executors and administrators rely on these documents to identify and inventory the assets of the estate, assess their value, and determine how they should be distributed among beneficiaries or sold to settle debts and taxes.

Documents that you need to pay attention to are Letters Testamentary or Letters of Administration, and Inventory of Assets. In the context of trusts, property documentation serves to establish the assets held within the trust and clarify the trustee's responsibilities regarding their management and distribution. Trustees must maintain accurate records of trust property, including any changes in ownership or value, to fulfill their fiduciary duties and ensure compliance with the trust instrument's terms. Documents that you need to pay attention to are Trust Agreement and Schedule of Assets.

Effective estate planning involves careful consideration of various factors to ensure that your wishes are carried out and your loved ones are provided for after your passing. By creating a comprehensive estate plan that includes a will, trust, and other essential documents, you can safeguard your assets, minimize taxes, and avoid probate delays and disputes. Additionally, staying informed about the probate process and ensuring that the appointed executor or administrator has the necessary authority and support is crucial for a smooth administration of your estate.

Lastly, establishing a well-structured trust and maintaining accurate records of trust assets can provide numerous benefits, including privacy, flexibility, and efficient distribution of assets to beneficiaries. Overall, prioritizing these best practices can provide peace of mind and ensure that your legacy is preserved according to your wishes.

Micy Liu
Managing Partner of Life Mission Capital
Fund Manager of Freedom Growth Fund
[email protected]

Disclaimer: The information contained herein is from sources believed to be reliable, however no representation by the Sponsors, either expressed or implied, is made as to the accuracy of any information on this property and all investors should conduct their own research to determine the accuracy of any statements made. Nothing in this message should be interpreted as a digital or electronic signature that can be used to authenticate a contract or legal document. The information presented in this guide should not be used as the sole basis of any investment decisions, nor is it intended to be used as advice with respect to the advisability of investing in, purchasing or selling securities, nor should it be construed as advice designed to meet the investment needs of any particular person or entity or any specific investment situation. Nothing in this email constitutes legal, accounting or tax advice or individually tailored advice. The reader of this guide assumes responsibility for conducting its own due diligence and assumes full responsibility of any investment decisions.

Disclosure of Interests:

Nothing on this website is intended to provide tax, legal, or investment advice. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation. All pictures shown in this document are for illustration purpose to show the type of properties that LIFE MISSION CAPITAL invests into and are not current offerings.

No Offer of Securities:
Under no circumstances should any material on this site be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only using the Confidential Private Offering Memorandum relating to the particular investment. Access to information about the investments is limited to investors who either qualify as accredited investors within the meaning of the Securities Act of 1933, as amended or those investors who generally are sophisticated in financial matters, such that they are capable of evaluating the merits and risks of prospective investments.


Life Mission Capital.com reserves all copyright and intellectual property rights to the content, information and data within this site. The contents within Life Mission Capital.com may not be modified, reproduced, stored in a retrieval system, transmitted (in any form or by any means) or used in any other way for commercial or public purposes without the prior written consent of Life Mission Capital.com. The recipient agrees to keep the contents of this site confidential and use it solely for personal use.