Patinelli & Chang, LLP

Estate Planning for Business

If you own your own business and plan for it to survive after you, it is important that you have an estate plan that allows that to happen.

In the U.S., people often put off estate planning for as long as possible. This includes people who make plans for many other things. There is just something about estate planning and contemplating their own deaths, that people want to put off.

A business owner makes a lot of plans for the business, including how to manage it and expand it. This is true, regardless of the age of the business person. If something happens to the business owner, however, their age doesn’t matter. When the owner passes away, something must be done with the business.

If plans are not made beforehand, the business is likely to close. Therefore, business owners need to have estate plans as the Savannah Morning News discusses in "Thinking the unthinkable: Businesses require estate planning."

There should always be a plan in place for what will happen, if a business owner passes away at any time. Plans need to be made regarding who will own the business, as well as who will manage it, if the proposed owner is too young or not interested. This is just good business planning and good estate planning.

Your business is important to you, so make sure you have a business succession plan and an estate plan in place that protects the business, in case something happens to you.

Reference: Savannah Morning News (April 11, 2018) "Thinking the unthinkable: Businesses require estate planning."

Planning for Family Businesses

It is more difficult for shareholders to get value out of privately-held family businesses than it is for public companies. It is important to understand that and to make plans around it.

If you leave your heirs shares in publicly traded companies, it is easy for them to turn those shares into cash anytime they wish. Shares in most public companies can be sold quickly and easily.

If you leave your family shares in a private or family business, it is much more difficult to turn those shares into cash. There are often restrictions on who can own the shares. There is not an easily and quickly accessible market to sell the shares.

 It means that money can more easily be lost, when you leave your heirs stock in a private company as the Wills, Trusts & Estates Prof Blog discusses in "The Family-Shareholder Wealth Roadmap."

One of the biggest mistakes that family businesses make, is not adequately considering the time value of money when it comes to making cash distributions to shareholders.

Companies often wait too long to make the distributions and thus the shareholders lose value. Another common mistake is using equity to finance operations, when debt financing would be better under the circumstances.

These problems can be overcome with the right assistance.

Family businesses should have financial advisers and accountants to help them. They should also seek estate planning attorneys to get help with how to pass the business on to heirs in a way that does not destroy the business.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 24, 2017) "The Family-Shareholder Wealth Roadmap."

Family Business Succession Planning in Torrance, CA

If you have a family business that you want to leave behind for your children or grandchildren, it is important that you not only plan ahead, but that you also start easing the way for the transition.

Any estate plan is going to be more effective the more you plan ahead for what might happen and the more you prepare your heirs for what property and responsibility they will receive. However, for most estate plans that is not absolutely necessary.

Most estate plans will still work out fine if you wait to make plans and do not tell your family what will happen. But, estate plans that include a family business are different. They will not work out so fine.

It is vital that you plan ahead for them as the Wills, Trusts & Estates Prof Blog writes in "Preparing the Family Business for Succession."

For the family business to thrive after the current owner passes away, careful plans must be made for who will be in charge next. Everyone needs to know who will be in charge on day one and, to make that go as smoothly as possible, it is important that the next leader knows what he or she is supposed to do.

Ideally, the next leader should be groomed for the role by taking part in the business on a day-to-day basis and making decisions about it sooner rather than later. Even if all that is done, it is important to plan for any contingencies that might occur. A secondary plan for succession should also be in place.

If you have a family business, do not delay. Talk to an estate planning attorney about how you can make sure it succeeds when you are no longer running it.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 6, 2016) "Preparing the Family Business for Succession."

CEO of Eva Airways ousted against dad's wishes

            The son of Eva Airways' founder was removed as Chairman of the board, against the wishes of the founder Chang Yung-Fa, who died at the age of 90. The youngest child of 5 children, Chang Kuo-Wei, served as chairman since 2011.  

Because there is a dispute over this claim with the rest of the family in court, the board felt they should avoid further controversy and return to professional management of the team.

Under the leadership of the youngest son, the company was expanding into new markets in North America by signing a deal worth more than US$6 billion for 26 Boeing jetliners, making it Taiwan's biggest ever single commercial plane purchase.

Whether or not it was truly the wish of the founder Mr. Chang that the company he built be lead by his youngest son, we will never know for sure. It is now a matter for the courts and the board to determine the direction of the company simply because of a lack of proper business succession planning.

The Evergreen founder - who died in January of this year - started his company in 1968 with a single cargo vessel and launched EVA Air in 1991, which is Taiwan's second largest carrier.

He ranked 17th in the list of Taiwan's richest people with an estimated wealth of US$1.6 billion in 2015, according to Forbes magazine.

Source: http://www.channelnewsasia.com/news/asiapacific/taiwan-s-eva-air-ousts/2594118.html