If you own a small yet flourishing business in North Carolina, you likely worry about what will become of the fruits of your labor once you pass away. Though you can always transfer ownership or assets to your offspring or spouse through a will, you must consider the tax complications of doing so. You must also consider the fact that your business’s assets may become susceptible to creditors or other claimants if you leave them unprotected. Fortunately, you can avoid the tax complications of transfer and protect your business’s assets by placing it in a trust. FindLaw explores the pros and cons of using a trust to hold your business.
By far the greatest benefit of placing your business in a trust is that your business will not have to go through probate once you pass away. This will save your loved ones considerable time and money when it comes time to assume control of your business. Moreover, because trusts provide for seamless transfer, your business will not suffer from downtime that may result from prolonged probate.
If you place your business in a revocable living trust, you can retain control over it for the remainder of your lifetime. Whether you wish to change the terms of your trust or transfer assets in and out of it, you are free to do so without consequences.
There are a few pitfalls to placing your company in a trust. For one, there must be a division between the equitable owner of the property and the legal owner. What this means is that you must appoint a trustee. While some people appoint a spouse or child, FindLaw warns that this may lead to complications in the event of a divorce or falling out. You could always hire a third-party, but before you do, make sure the costs of doing so do not outweigh the potential savings of avoiding probate.
You should not use this article as legal advice. It is for educational purposes only.