Will Your Business Survive Probate?
I have talked a lot in these posts about the importance of properly funding your living trust. By funding, I mean transferring ownership of assets into the trust. One asset that is regularly overlooked is an ownership interest in a closely held business such as a corporation or limited liability company (LLC). Whether it is shares in a corporation or limited liability company units, when left in an individual’s personal name the result may be a probate upon the death of that individual. This could result in the business being tied up in court proceedings for an extended period of time. However, if the business interest is properly transferred to the living trust probate can be avoided.It is important that operating agreements or buy-sell agreements be reviewed and revised where necessary to allow for the transfer of the ownership interest to the living trust. The fact that a living trust is the owner of the interest in the business need not interfere with the owners desires to require the sale of the interest upon the occurrence of a triggering event such as the death or disability of a particular individual.The transfer of an ownership interest is generally accomplished by preparing an assignment of the interest to the living trust and updating the company records to reflect the change. If stock certificates or unit certificates have been issued, new certificate should be issued reflecting the transfer of the ownership interest to the trust. Whether you own the company individually or with others being proactive today, making sure these transfers take place can save your family significant time and money down the road and may just save your business.