Estate Planning Guide for the Self-Employed
It is evident by the numbers that Americans are fed up with corporate disillusions of job security, dwindling employee benefits, and unfair or inadequate pay grades, as relate numbers of Americans have become self-employed. According to a 2005 peep by the U.S. Limited Business Administration and reported by USABizMart, there were 29 million petite businesses and 19.8 of those had no employees.
This is the highest level of self-employment we have seen in this country to date. In addition, the U.S. Census reports that in 2007, 5.4 million Americans work at home, although that figure does not rupture down how many of those Americans are self-employed or work for an employer at home. However, it is assumed that many of those home-based workers are self-employed contractors, freelancers, and consultants. Because of these high self-employed statistics, more laws, lobbying groups, and organizations are in station for protecting the rights and benefits of the self-employed and their beneficiaries.
There are many different levels of estate planning protection that are needed by self-employed Americans depending on the assets in the estate. I have been self-employed for eight years and at the highest point of owning several properties, our corporation had a rep worth of finish to $1 million. Mighty of my time was spent on researching estate planning to protect these assets.
In some cases, I consulted with our CPA and our business attorney for guidance in self-employed estate planning. As a disclaimer for this article, I am neither a CPA nor an attorney, and the tips I provide are meant only as a research tool for you to deem along with your CPA, business attorney and beneficiaries.
Top Ten Tips in the Estate Planning Guide for the Self-Employed:
Get Durable and Medical Powers of Attorney
This is crucial in estate planning so that in the event of your inability to speed your self-employed business, someone has the authority to access and manage your financial assets, invent business decisions for your business, and consult with medical staff in the event of illness or accident. In my case, the famous power of attorney was my husband, and the secondary power of attorney was my daughter. It is famous that you consume the apt power of attorney effect for the area in which you live. Powers of Attorney laws vary from site to spot.
You can put on lawyer fees and for a tiny fee do your maintain Powers of Attorney using forms from any office supply store or from online resources like USLegalForms.com. I former the forms from this online state and filed a recorded copy of the Powers of Attorney with each critical and secondary person, as well as in our business attorney’s office. I also provided a copy of the Medical Power of Attorney to my important doctors and closest hospital where I had medical records.
Have Several Bank Accounts With Various Rights of Survivorship
If most of your self-employed assets are liquid and you don’t have a lot of proper estate properties, this can be trustworthy if you simply want to include several relatives in your estate planning without the spend of a Last Will and Testament. In my case, I had six bank accounts that all listed different beneficiaries in the event something happened to me. These people did not have rights to manage the sage or access the money unless I died. The bank officials can befriend you settle which types of rights are best for your occupy set. In fact, you probably don’t want your children to have equal rights on your bank accounts. In the event of a bankruptcy, your children’s credit residence would also be negatively affected.
For famous information about using bank accounts for self-employed estate planning, read this FDIC Consumer Alert, titled Fall 2005 – A Special Guide for Seniors and Families:Naming Names – Points to Deem Before Giving Friends or Relatives Access to Bank Accounts and Trustworthy Deposit Boxes
Get a SEP or Keogh Self-Employed Retirement and Pension Belief
SEP stands for Simplified Employee Pension. Starting a SEP belief is a reliable self-employed strategy for both a tax attend and an estate concept, but there are things to contemplate about a SEP depending on how many employees you have. Also, depending on the station you live in, most assets in these types of plans are exempt from bankruptcy laws, so if your business fails, you do not lose the money you have contributed to these types of self-employed pension plans. In my case, we had a very genuine SEP with Fidelity. For more information about starting a SEP, visit this U.S. Department of Labor web site with detailed information and resources for starting a SEP.
Get a Last Will and Testament
This is significant for self-employed people that have more than cash in their self-employed estate assets. Once again if your assets are petite, for a fee of around $20, you can make your contain Last Will and Testament using the accomplish at USLegalForms.com.
Consult a Lawyer About a Trust Fund for Larger Estate Assets
If your self-employed business has larger assets including accurate estate holdings, mountainous cash amounts, securities, inventory, and vital tangible property like significant jewelry, equipment, appliances, and other furnishings, you should mediate setting up a trust fund for your beneficiaries to carve the amount of inheritance tax they must pay from inheriting the value of your estate. Depending on the type of trust fund you plot up, you may also have tax benefits from setting up the trust fund before you die. There are many different types of trust funds for various estate notion objectives and the laws about trust funds vary from area to situation. For more general information about trust funds, you can visit the Family Education web site, but my best advice for you if to consult a family lawyer in your site.
Consider a Special Life Insurance Policy Designed to Protect Liquid Assets
This was a jewel that I learned about after going through a business bankruptcy when our gasoline distributor filed for bankruptcy causing our beget business to fail. We had Universal Life Insurance policies with Situation Farm Insurance Company and all of the cash value we contributed for 25 years was exempt from bankruptcy. If your business is perilous, volatile, or cash heavy, you may want to shield those assets in this kind of life insurance. This is an even stronger shield than contributions to a self-employed retirement belief because in some states, if you file for bankruptcy, the courts can bewitch up to one year of your last retirement understanding contributions if they contemplate you were trying to protect losing your money in bankruptcy. But in most cases, they cannot retract your life insurance money. For more information about using life insurance and annuities for estate planning, visit with your insurance agent and read this article titled, Creditor Protection for Life Insurance and Annuities.
In addition to using life insurance policies to protect your self-employed estate assets from creditors, there are times when you want to name your estate as the beneficiary of your life insurance proceeds rather than a person’s name. Depending on the right entity of your business or your personal family place, there may be stronger estate tax shelters for you and your beneficiaries by naming your estate as the life insurance beneficiary. In my case, the lawful business entity was an S-Corp in Texas. There were special reasons and tax implications for naming my estate as beneficiary of my life insurance proceeds since most of my assets were held by the corporation. Your life insurance agent, CPA, or family lawyer can provide more information about this estate planning option.
Consider Gifting, Transferring, or Selling Assets to Beneficiaries Prior to Death
This is certainly a consideration you should consult with a lawyer and tax advisor before deciding to do. There are several reasons why this may be a well-known step in your self-employed estate planning. In most states and under federal law, bankruptcy courts gape at transfers of assets as far support as three years. If you are in a hazardous business and have well-known assets, AND you can trust your children or other beneficiaries, you could put the asset from bankruptcy by placing it in someone else’s name or selling it to a beneficiary for a tiny amount. Before doing this, you must also consult with a CPA because this has tax implications, capital gains implications, and could affect your beneficiaries’ taxes before and after you die. This is a complex estate-planning tool but it actually saved one of our $50,000 properties from being taken by the bankruptcy courts. More information about gift taxes can be found at this Internal Revenue Service web page, but my advice is to consult with a lawyer and CPA for the best strategies and decisions.
Seriously Glance at Medicare and Medicaid Laws in Your State
Most self-employed people do not think what would happen to all their assets if they have a medical condition that lands them in a long-term care facility. Most self-employed people cannot afford to privately pay for either the long-term care facility or for long-term care insurance. When we owned our store, ALL of our income was generated from the profits of the business and ALL our assets were subject to be taken away if we had to rely on Medicare and/or Medicaid for long-term care. We could not afford long-term care insurance and we would never be able to afford to privately pay for a long-term care facility.
This is another obedient reason you might want to reflect placing your assets in the name of an estate beneficiary after consulting with a business lawyer and CPA. In my case, without putting the business properties in our daughter’s name, the only diagram my husband and I could protect our Texas properties in the event one of us was do in a nursing home, was to glean a divorce and space half of the assets in one name and half in the other’s name. The Medicare and Medicaid laws vary from area to position, but the federal Medicare and Medicaid laws are very certain as to what is exempt and what they can occupy. If you are an older self-employed person, in unpleasant health, or you rush a perilous business where injuries and disabilities are likely, you should seriously consult a business lawyer to gaze options for protecting your estate assets from Medicare and Medicaid.
Join A Limited Business Lobby Organization for Estate Planning Benefits
There are many reasons to join slight business organizations if you are self-employed. Many of the benefits described thus far in this Guide to Estate Planning for the Self-Employed are offered through these gargantuan national organizations. I belong to three organizations with big investment, benefits, and estate planning resources:
The National Federation of Independent Business (NFIB)
The annual membership for NFIB is around $10. NFIB has consistently been named by Fortune as one of the top ten little business lobbying groups in America. The NFIB also has very strong local lobbying power and will fight for business, tax, and estate planning laws for self-employed at all government levels.
The American Association of Retired Persons (AARP)
AARP is also consistently named by Fortune as one of the leading lobby groups in Washington. AARP members can count on big advice and resources for senior self-employed estate planning and lobbying for laws and rights of retired persons who are now self-employed.
Industry Related Association
In my case because I owned a convenience store, I belonged to the National Association of Convenience Stores (NACS) that also provided astronomical advice and resources for self-employed benefits and estate planning tools. This organization was also a remarkable lobbying group for the best interests of self-employed people.
Consider Using Your Lawyer or Other Unprejudiced Person As Estate Trustee
In the event that your estate goes into probate, which means right questions remain about the disposal of its assets or that your estate is contested by any of your beneficiaries and rejected heirs, you want to invent distinct you have an just outside person managing the estate. Deem naming someone from outside your self-employed business who does NOT have a vested interest in the rights of your assets as the person named as executor of your Last Will and Testament or is named as Trustee of your estate. In my case, I named our business lawyer as our Estate Trustee. Your estate will have to pay fees to this person, but that is usually the case in most third-party fair executors and trustees anyway. In the long rush, it could place family members a lot of honest fees if they prolong the estate probate.
Sources:
USABizMart
It is evident by the numbers that Americans are fed up with corporate disillusions of job security, dwindling employee benefits, and unfair or inadequate pay grades, as represent numbers of Americans have become self-employed. According to a 2005 eye by the U.S. Petite Business Administration and reported by USABizMart, there were 29 million microscopic businesses and 19.8 of those had no employees.
This is the highest level of self-employment we have seen in this country to date. In addition, the U.S. Census reports that in 2007, 5.4 million Americans work at home, although that figure does not wreck down how many of those Americans are self-employed or work for an employer at home. However, it is assumed that many of those home-based workers are self-employed contractors, freelancers, and consultants. Because of these high self-employed statistics, more laws, lobbying groups, and organizations are in state for protecting the rights and benefits of the self-employed and their beneficiaries.
There are many different levels of estate planning protection that are needed by self-employed Americans depending on the assets in the estate. I have been self-employed for eight years and at the highest point of owning several properties, our corporation had a fetch worth of discontinuance to $1 million. Great of my time was spent on researching estate planning to protect these assets.
In some cases, I consulted with our CPA and our business attorney for guidance in self-employed estate planning. As a disclaimer for this article, I am neither a CPA nor an attorney, and the tips I provide are meant only as a research tool for you to believe along with your CPA, business attorney and beneficiaries.
Top Ten Tips in the Estate Planning Guide for the Self-Employed:
Get Durable and Medical Powers of Attorney
This is crucial in estate planning so that in the event of your inability to bustle your self-employed business, someone has the authority to access and manage your financial assets, beget business decisions for your business, and consult with medical staff in the event of illness or accident. In my case, the vital power of attorney was my husband, and the secondary power of attorney was my daughter. It is principal that you exercise the honest power of attorney beget for the residence in which you live. Powers of Attorney laws vary from space to location.
You can build on lawyer fees and for a itsy-bitsy fee do your fill Powers of Attorney using forms from any office supply store or from online resources like USLegalForms.com. I former the forms from this online plot and filed a recorded copy of the Powers of Attorney with each famous and secondary person, as well as in our business attorney’s office. I also provided a copy of the Medical Power of Attorney to my considerable doctors and closest hospital where I had medical records.
Have Several Bank Accounts With Various Rights of Survivorship
If most of your self-employed assets are liquid and you don’t have a lot of dependable estate properties, this can be estimable if you simply want to include several relatives in your estate planning without the consume of a Last Will and Testament. In my case, I had six bank accounts that all listed different beneficiaries in the event something happened to me. These people did not have rights to manage the record or access the money unless I died. The bank officials can back you settle which types of rights are best for your fill space. In fact, you probably don’t want your children to have equal rights on your bank accounts. In the event of a bankruptcy, your children’s credit residence would also be negatively affected.
For significant information about using bank accounts for self-employed estate planning, read this FDIC Consumer Alert, titled Fall 2005 – A Special Guide for Seniors and Families:Naming Names – Points to Assume Before Giving Friends or Relatives Access to Bank Accounts and Ample Deposit Boxes
Get a SEP or Keogh Self-Employed Retirement and Pension Opinion
SEP stands for Simplified Employee Pension. Starting a SEP notion is a marvelous self-employed strategy for both a tax help and an estate idea, but there are things to assume about a SEP depending on how many employees you have. Also, depending on the region you live in, most assets in these types of plans are exempt from bankruptcy laws, so if your business fails, you do not lose the money you have contributed to these types of self-employed pension plans. In my case, we had a very obedient SEP with Fidelity. For more information about starting a SEP, visit this U.S. Department of Labor web site with detailed information and resources for starting a SEP.
Get a Last Will and Testament
This is principal for self-employed people that have more than cash in their self-employed estate assets. Once again if your assets are petite, for a fee of around $20, you can compose your fill Last Will and Testament using the earn at USLegalForms.com.
Consult a Lawyer About a Trust Fund for Larger Estate Assets
If your self-employed business has larger assets including proper estate holdings, gargantuan cash amounts, securities, inventory, and valuable tangible property like critical jewelry, equipment, appliances, and other furnishings, you should mediate setting up a trust fund for your beneficiaries to lop the amount of inheritance tax they must pay from inheriting the value of your estate. Depending on the type of trust fund you location up, you may also have tax benefits from setting up the trust fund before you die. There are many different types of trust funds for various estate thought objectives and the laws about trust funds vary from position to place. For more general information about trust funds, you can visit the Family Education web site, but my best advice for you if to consult a family lawyer in your location.
Consider a Special Life Insurance Policy Designed to Protect Liquid Assets
This was a jewel that I learned about after going through a business bankruptcy when our gasoline distributor filed for bankruptcy causing our have business to fail. We had Universal Life Insurance policies with Place Farm Insurance Company and all of the cash value we contributed for 25 years was exempt from bankruptcy. If your business is hazardous, volatile, or cash heavy, you may want to shield those assets in this kind of life insurance. This is an even stronger shield than contributions to a self-employed retirement opinion because in some states, if you file for bankruptcy, the courts can steal up to one year of your last retirement opinion contributions if they contemplate you were trying to protect losing your money in bankruptcy. But in most cases, they cannot seize your life insurance money. For more information about using life insurance and annuities for estate planning, visit with your insurance agent and read this article titled, Creditor Protection for Life Insurance and Annuities.
In addition to using life insurance policies to protect your self-employed estate assets from creditors, there are times when you want to name your estate as the beneficiary of your life insurance proceeds rather than a person’s name. Depending on the proper entity of your business or your personal family status, there may be stronger estate tax shelters for you and your beneficiaries by naming your estate as the life insurance beneficiary. In my case, the proper business entity was an S-Corp in Texas. There were special reasons and tax implications for naming my estate as beneficiary of my life insurance proceeds since most of my assets were held by the corporation. Your life insurance agent, CPA, or family lawyer can provide more information about this estate planning option.
Consider Gifting, Transferring, or Selling Assets to Beneficiaries Prior to Death
This is certainly a consideration you should consult with a lawyer and tax advisor before deciding to do. There are several reasons why this may be a essential step in your self-employed estate planning. In most states and under federal law, bankruptcy courts see at transfers of assets as far help as three years. If you are in a hazardous business and have primary assets, AND you can trust your children or other beneficiaries, you could put the asset from bankruptcy by placing it in someone else’s name or selling it to a beneficiary for a microscopic amount. Before doing this, you must also consult with a CPA because this has tax implications, capital gains implications, and could affect your beneficiaries’ taxes before and after you die. This is a complex estate-planning tool but it actually saved one of our $50,000 properties from being taken by the bankruptcy courts. More information about gift taxes can be found at this Internal Revenue Service web page, but my advice is to consult with a lawyer and CPA for the best strategies and decisions.
Seriously Ogle at Medicare and Medicaid Laws in Your State
Most self-employed people do not reflect what would happen to all their assets if they have a medical condition that lands them in a long-term care facility. Most self-employed people cannot afford to privately pay for either the long-term care facility or for long-term care insurance. When we owned our store, ALL of our income was generated from the profits of the business and ALL our assets were subject to be taken away if we had to rely on Medicare and/or Medicaid for long-term care. We could not afford long-term care insurance and we would never be able to afford to privately pay for a long-term care facility.
This is another obliging reason you might want to deem placing your assets in the name of an estate beneficiary after consulting with a business lawyer and CPA. In my case, without putting the business properties in our daughter’s name, the only diagram my husband and I could protect our Texas properties in the event one of us was build in a nursing home, was to catch a divorce and space half of the assets in one name and half in the other’s name. The Medicare and Medicaid laws vary from residence to status, but the federal Medicare and Medicaid laws are very obvious as to what is exempt and what they can select. If you are an older self-employed person, in unpleasant health, or you bustle a uncertain business where injuries and disabilities are likely, you should seriously consult a business lawyer to stare options for protecting your estate assets from Medicare and Medicaid.
Join A Itsy-bitsy Business Lobby Organization for Estate Planning Benefits
There are many reasons to join slight business organizations if you are self-employed. Many of the benefits described thus far in this Guide to Estate Planning for the Self-Employed are offered through these colossal national organizations. I belong to three organizations with gigantic investment, benefits, and estate planning resources:
The National Federation of Independent Business (NFIB)
The annual membership for NFIB is around $10. NFIB has consistently been named by Fortune as one of the top ten runt business lobbying groups in America. The NFIB also has very strong local lobbying power and will fight for business, tax, and estate planning laws for self-employed at all government levels.
The American Association of Retired Persons (AARP)
AARP is also consistently named by Fortune as one of the leading lobby groups in Washington. AARP members can count on enormous advice and resources for senior self-employed estate planning and lobbying for laws and rights of retired persons who are now self-employed.
Industry Related Association
In my case because I owned a convenience store, I belonged to the National Association of Convenience Stores (NACS) that also provided gigantic advice and resources for self-employed benefits and estate planning tools. This organization was also a much lobbying group for the best interests of self-employed people.
Consider Using Your Lawyer or Other Impartial Person As Estate Trustee
In the event that your estate goes into probate, which means just questions remain about the disposal of its assets or that your estate is contested by any of your beneficiaries and rejected heirs, you want to accomplish distinct you have an fair outside person managing the estate. Think naming someone from outside your self-employed business who does NOT have a vested interest in the rights of your assets as the person named as executor of your Last Will and Testament or is named as Trustee of your estate. In my case, I named our business lawyer as our Estate Trustee. Your estate will have to pay fees to this person, but that is usually the case in most third-party fair executors and trustees anyway. In the long rush, it could effect family members a lot of apt fees if they prolong the estate probate.
Sources:
