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Does My Business Go Through Probate if I Die?

Does My Business Go Through Probate if I Die? For many of my clients who own businesses, their business is the largest asset in their estate. As a result, it is critical that this asset is properly transferred after their death. Several clients have asked me if their business or their interest in a business passes through probate if they die. The short answer is, “yes”, in general, your business or business interest will also have to go through a probate if you pass away if it is valued at $75,000 or more and there is not additional planning done to avoid a probate. This blog discusses this issue in more detail. Your Business Has to Go Through a Probate Just Like Any Other Asset in Your Estate. Under Arizona law, if you pass away with assets in your estate that are valued at $75,000 or more, then your estate will have to go through a probate process instead of completing a small estate affidavit. This $75,000 threshold applies to businesses and business interests too. Thus, unless you take some additional planning steps, your business or business interest will probably have to go through the normal probate process in Arizona. This can add additional time to the administration of your estate, additional cost to the administration, and the requirement of filing certain paperwork with the Arizona courts in order to administer your estate after you are gone. However, as is discussed below, with proper planning, you can avoid probate for your business  or your business interest by using two relatively straight-forward strategies. For businesses that have two or more owners, a buy-sell agreement can efficiently set forth the way the transfer will occur, and this is typically handled outside of a will or a trust. If the business is owned by one owner or by a married couple, a buy-sell agreement will not work and the transfer is typically set forth in a will or a trust or in certain business formation documents. How Does a Buy-Sell Agreement Work for Businesses That Are Owned by Two or More Owners? A buy-sell agreement is a written agreement that provides a mechanism for the orderly transfer of an owner’s interest to the other co-owners on the occurrence of certain triggering events. Without an exit plan, the owners of an Arizona LLC or corporation are essentially stuck with each other indefinitely even if one of the other owners dies, becomes incapacitated, gets arrested, or files for bankruptcy. A buy-sell agreement defines what...

How Do I Administer a Trust?

How Do I Administer a Trust? So, you just found out that you are the trustee of your relative’s trust. What do you do? This blog gives an overview of the steps that a trustee needs to take to administer a trust after the settlor (i.e., creator of the trust) passes away. In general, a trust administration is the orderly administration of a trust after settlor or the settlors pass away.  It can either be the administration and distribution of one or more trusts for the benefit of a surviving spouse after one spouse passes away or the administration and distribution of a trust to the beneficiaries after a single settlor passes away or both settlors pass away. This particular blog will focus on the administration of a trust created by one settlor.  How Long Does a Trust Administration Take? In general, a trust administration takes between six months and one year to complete.  There are many factors that can lead to a delay in the administration of a trust.  One factor that always causes delays in the trust and increases the attorney’s fees and costs associated with it is the presence of difficult parties.  Most trust  administration issues can be resolved by the parties with appropriate dealings outside of the court.  However, like any contested matter, the more that that trustee has to go back to court to get administrative issues resolved, the more the trust administration process will be delayed.  Another factor that can delay the trust administration process is a difficult asset, such as a hard to sell timeshare or other trust asset.  Finally, one additional factor that can delay the trust administration process is a formal accounting in a case.  Because the court accountant and the court typically take months to approve a final accounting, this almost always delays the trust administration process considerably.  For this reason, unless it is unavoidable, I always encourage the trustee to do an informal accounting with the beneficiaries, rather than a formal accounting approved by the court. What Are the Key Steps of a Trust Administration? After the settlor passes away, there are several things that need to be done to make sure that his or her trust is administered properly.  First, it is important to meet with an attorney as soon as possible after the settlor passes away. Depending on the type of trust that you are dealing with, there may be deadlines to make certain tax and other elections that need to occur within a certain time...

What Happens to My “Digital Assets” If Something Happens to Me?

What Happens to My “Digital Assets” If Something Happens to Me? In the last 20 years, the concept of “digital assets” has emerged as our world has been taken over by the likes of web domains, e-mails, Facebook, and Twitter. The term “digital assets” can include many different things: your ownership and intellectual property rights in social media accounts, your access to online bill payments or money processing, your rights to use software or listen to music, and your ability to view e-mails and other similar information. These digital assets primarily take on these different forms: (1) information stored on computers, tablets, and smart phones, such as photographs, videos, e-mails, and music; (2) online accounts and social media, such bank accounts, bill pay, accounts with Amazon.com, Pay Pal, or e-Bay, and subscriptions to online magazines as well as Facebook, LinkedIn, and Twitter; and (3) storing files in “the cloud”. This has created a whole new area in our laws, and with technology ever changing, our legal system is frankly struggling to keep up. These “digital assets” impact almost everyone in our modern society. As a result, there have been several cases in recent years about who has access to these digital assets when someone passes away. This blog discusses a recent Arizona statute that addresses these issues and also gives the readers some practical advice about how to handle their own digital assets. Arizona’s New Digital Assets Statute In an effort to address these concerns, Arizona legislators passed a new law dealing with digital assets that went into effect in May, 2016 (“Act”). Although the Act also deals with the ability of trustees, conservators, and agents under a financial power of attorney to access digital assets, this blog focuses on the sections of the Act that deal with a personal representative’s right to access such assets. First, some comments by the drafters of the Act are helpful in understanding the framework of the Act.  The Act creates in “three-tier priority system”. First, the Act “gives top priority to a user’s wishes as expressed using an online tool.” Second, if there is no online tool in effect, then the Act “gives legal effect to the user’s directions” in a will or trust.  Third, if no such directions exist, then “the terms of service governing the account will apply.” In general, when a personal representative is making a request for disclosure from Outlook or Facebook, Twitter, he or she must follow the terms of the Act. Under the Act, “if a...

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