How Wealth Is Lost in Traditional Legal Planning

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Writer  // Katie Charleston      Photography // Laura Arick

Traditional legal planning revolves around transactions. The business owner or individual finds an attorney, requests a transaction, pays the attorney, receives documents in a nice binder and puts them on a shelf, thinking they have “done their diligence” in planning, and they don’t think about their plan again until tragedy strikes or conflict arises.

It is a regular occurrence to have potential clients come into my office and tell me they “thought their parents had taken care of it” or “we had an agreement.” These are afterthoughts, however, as the plans were never put in place, the intentions not put in writing and the forethought not carried out. Even the best of intentions leaves businesses and families in court, conflict and loss when plans are not executed, or worse, a costly but ineffective plan is put in place.

Unfortunately, this is an all-too-common experience. For some people, this type of planning gets them through for a while. But there are others who have paid thousands of dollars to an attorney for a business or estate plan that ultimately fails, leaving their loved ones in litigation, or worse, without any plan or inheritance and a business that fails. Then there are some that end up meeting with a firm like Katie Charleston Law P.C., which provides a complete approach to planning before issues arise.

Traditional Legal Planning
Katie Charleston

Business Succession Planning

Every business owner will retire or die at some point. This means that the business they have worked so hard to build will either pass to a relative, be sold to a new owner or die with the original owner or their retirement. Business owners often plan for the immediate and near future but fail to plan for the long term. Without a long-term plan that needs to include a buy-sell agreement, a business is likely to lose substantial assets and could fail altogether, leaving the work of the business owner meaningless, and even more devastating, loved ones without assets and the business owner’s legacy.

Traditional Legal Planning

A proper business plan should account for succession from the beginning and be an ongoing process throughout the life of the business. Many family-owned businesses intend to have later generations carry on the business after retirement or death but fail to consider the willingness or ability of the latter generation to do so. This failure to confront the alignment of the business owner’s plan with the reception of the latter generation oftentimes leaves businesses in a crippled state at the owner’s retirement and can prove devastating in the event of the owner’s incapacity. In fact, many businesses lose substantial revenue in transition due to this failure of succession planning.

Planning for Business Sale

Other business owners plan to sell their business when they’re ready to retire but never build their business for optimal value. Small business owners, especially, run their businesses to minimum capacity and fail to think beyond meeting operation and salary requirements. When retirement through investor acquisition is the goal, however, businesses need to start planning to sell as soon as they know this is their intent. This means scaling your business to optimal value through brand protection, entity formation and financial planning. To do this, however, the business owner’s service or product must be defined and a niche chosen so that the business brand can be developed and the proper trademarks, patents or copyright protections put in place. A business brand and any intellectual property, like patents, trademarks or copyrights, add value to a potential buyer.

Along with small business owners typically running their businesses to meet minimum financial needs, they also often fail to consider the shape of their financial records. Buyers want to see a steady flow of revenue and predictable debt or dips in income. Financial records that show gaps or are inconsistent will be frowned upon and could dissuade a buyer. It is necessary for business owners who want to sell a business or to retire to keep their records accurate, and more importantly, to ensure the business revenue and debt is relatively consistent and if not, be able to explain fluctuations.

Both failing to consider if later generations want to or can carry on a business and failing to prepare your business to sell lead to business devaluation and, ultimately, failure.

A business succession plan is necessary. Such plans should include not only your financial assets but also the culture and branding of the business, as well as other values important to the owners, such as company morale. With a proper succession plan, controls can be put in place to make sure these values are carried on in a business.

Business succession planning is necessary, but a business owner should start with the foundation, and that is an estate plan.

Estate Planning

Benjamin Franklin once said, “Nothing is certain except death and taxes.” Everyone will become incapacitated or die at some point—it’s inevitable. This means that you will be unable to care for minor children or make financial and health decisions. It also means that someone else will make these decisions for you. The traditional estate planning experience takes into account the passing of your assets, but little more. In fact, many estate planning attorneys plan for your assets but fail to plan for your children or legacy and do little or no follow-up to ensure the plan is followed.

Traditional Legal Planning

Importance of a Trust in Estate Planning

Most people understand the value of a trust—it allows your assets to be transferred privately to your loved ones and saves your loved ones from lengthy probate, fees and taxes. The private nature of a trust is important to protect your loved ones from predators who can seek out new inheritance from public probate hearings.

That a trust is carried out swiftly saves your family the sometimes years of probate hearings to access any assets you left them. A trust is an expense to you now, but its value cannot be ignored when you understand that your heirs will save approximately 5% of your total estate in probate fees, and that’s if no conflicts arise. The value of a trust is further made clear by the ability to transfer real estate through a trust to save your heirs thousands in tax had they inherited through a will or probate.

It is a common misconception that a will keeps your assets out of probate court—it does not. Wills go through the probate court. The probate court is required to oversee the execution of a will. This means that the lengthy probate, fees and taxes are not avoided by putting a will in place. Only a trust can accomplish those savings.

Estate Planning for Minors

Parents with minors at home have additional, many times unknown, challenges. If proper documentation is not put in place, when you die or become incapacitated, your children are at risk of being placed with child protective services and put into the system. Parents must choose and document alternative guardianship to protect their children. A child who has lost a parent is already in a terrified state, but to be taken from their home and placed with people they don’t know can be devastating.

Many people assume that a relative will take care of their child but fail to consider that relative’s willingness to do so or that a conflict among relatives will arise, leaving a child in the middle of court and conflict. Unfortunately, this is common with traditional estate planning, where attorneys have failed to plan for minor children or to contemplate exceptional circumstances.

Planning for Family Legacy

While the traditional estate plan records your wishes for financial assets, a complete estate plan should plan for minors and assets and take into account family legacy. A family legacy is the historical, spiritual and cultural beliefs of the family. We all have family that have migrated here from other countries, have religious or other spiritual beliefs and a culture we grew up in or created for our family. If these legacies, these values, are not documented for future generations, they will be lost. A complete plan will ensure these legacies are captured so they can be carried on for generations to come.

Unclaimed Property

Across the country, there are billions of dollars left in departments of unclaimed property. Much of this is the money and assets of those who have passed away and had no estate plan or had an estate plan but provided no way for their family to identify or inventory their assets. Some of this is money or assets of the incapacitated who had not prepared an estate plan or left instructions to their loved ones on managing their assets. All the money and assets in those departments could have been successfully passed to loved ones through a proper estate plan. It’s important to remember that an estate plan is a living document, and it should be reviewed and updated regularly. Otherwise, it will fail to work as intended because lives change, and assets liquidate and transform.

Katie Charleston Law P.C.

Katie Charleston Law P.C. is not the traditional business and estate planning firm. When you plan with us, your financial assets are planned for as are your family and business values. Your plan will be designed around your goals, not the traditional or template plans that have been followed for years and have led to a loss of financial, historical, spiritual and cultural wealth.

Minor children will be planned for so that no child ends up in child protective services, conflict or a court battle. Your assets will be recorded in such a way that the money you have worked so hard for does not add to the billions of dollars already left to the departments of unclaimed property because it could not be identified by relatives but instead goes to your family that you work so hard for today. You will develop a long-term partner in the success of your business and the protection of your family.

From designing a unique plan to recording your values and following your path to ensure your plan is updated and followed, you will find that we see you as more than just a client—you are also a member of our community. To get a business or estate plan designed for you, contact Katie Charleston Law P.C. at or (317) 663-9190.