If You Own a Business, Don’t Risk It By Ignoring Estate Planning

As 2020 unfolded and the joy of spring quickly dissolved into a desperate search for toilet paper, we became aware of how quickly things can change in an instant.  It has made me aware of the necessity of planning and being prepared.

This is especially true for business owners and anyone else who has assets and loved ones they want to protect.

Estate planning is neither complicated nor just for people of a certain age. 

To gain more insight and find out how estate planning can protect companies from business identity theft, I talked to Blake Johnson, a registered agent and managing partner of Trusted Estate Planning Attorneys, a Company Alarm partner.  He walked me through some of the essentials of wills, trusts, and estate planning and how everyone – and particularly business owners and their heirs – can avoid the considerable expense and traumatic fallout of a protracted probate fight over assets.

Is there anyone who doesn’t need estate planning?

Blake explains why everyone over the age of 18 needs to have a minimum of a will or other document stating what they want to happen should they die or become incapacitated.

[Blake Explains “ Not really! I think no matter what your situation is, if you're over the age of 18, that's when in most states you can actually execute a will or any document, you need to be doing something.

“Now, if you don't have a lot of assets, it doesn't make sense to do a full-blown will and trust, the power of attorney, and pay an attorney for all that if you don't have the assets to justify it. So one of the things that I tell young people who haven't bought a home yet, they don't have kids, is to at least do a holographic will. And so that's something that most states acknowledge if you write it in your own handwriting. Dated at the top, signed at the bottom and that's considered a valid will. ‘This is my last will. This is why I want to get it. This is who I want in charge as the executor.’ And as long as you meet those three requirements of 100 percent in your handwriting, date at the top and signed at the bottom, that's considered a valid will in many states.”]

Opportunity for business identity theft.

What Blake just described amounts to the bare minimum any adult can do to make sure they have the final say even after they die or become incapacitated.  If you don’t execute these documents, those decisions are ultimately made by the courts. 

But most business owners need more than the bare minimum.  You need the help and advice of a professional. That’s where estate planning and trusts become vitally important for people with children, valuable assets, and – especially – business interests.

“Once you own a home or you have kids, then we want to look at the next step, a plan which is actually sitting down with an attorney to do the estate,” Blake says.

For business owners, a lack of estate planning can cause a world of complications for heirs and partners.  Without the proper documents, you might inadvertently leave that business or company vulnerable to business identity theft. 

Blake explains that once you’ve got the proper documents in place,  “If you own any real property or if you have a business that's worth more than $25,000, (each state's different), when you pass away, we wouldn't have to go through probate court to get those assets to the correct people.” 

Blake explains what can happen if you don’t have the paperwork in place.

[Blake says: “Now, the common scenario is, let's say you have business partners. They're not related. They're just friends who started a business now worth a couple hundred thousand and one of the partners dies. The first thing is, we have to go through court to get the business ownership transferred to the next of kin. If it was community property or it goes to kids or in some cases it's split between spouse and kids, which is a nightmare in and of itself. But you have the nightmare of going through court to get the  ownership transferred.

That could take from six months to a year and in the meantime, any major business decisions you want to make need court approval.

Then there’s another problem that can come out of probate and that involves your heirs who want to keep a business going ending up forced into business relationships with former partners, spouses of partners, ex-spouses, their children. And so through your estate planning or business succession planning, you can take care of all that and specify what you want to actually have happen.

When we're going through probate court and you don't have somebody who steps in and is actively taking on the role of managing the business, that's when that business can be exposed to business identity theft because it's somebody stepping in who probably doesn't know the day-to-day functions, doesn’t know that they're supposed to file an annual list or that there is it a list of officers filed with the state. And so they may not get notice until the next year when the renewal is done or the renewal is filed by somebody else so that they can become the manager of the business and steal the identity.

And you have no idea of that because you don't know that that's part of the process.

And so there's a big risk there of somebody coming and stealing the business identity and taking over as manager and leveraging the company. And the heirs have no idea because they're not involved with the business on day-to-day basis.”]

Many business owners miss the deadline to renew their company’s paperwork and doing so doesn’t seem like a big deal. But this simple oversight can result in your company being victimized by business identity theft. Blake says he has had many clients who were not aware they were supposed to file a renewal or list with the state, and the businesses went into default or had their licenses revoked.  If this happens and the business owner dies, it creates a nightmare scenario for that person’s heirs.

“And so we have to try and basically resurrect the business,” he says.

Registered agents like Blake educate their clients about business identity theft and Company Alarm and its partners also offer a service that reminds clients when they need to get those renewals squared away.

After being charged $1,200 for missing his deadline to renew, one owner joined Company Alarm to make sure it never happens to him again.  

Unfortunately, there is a lack of security against predatory cybercriminals on the website of your Secretary of State.  That leaves the door wide open for some to maliciously change your registration information into their own name, allowing them to

swoop in, assume control and plunder assets long before you, the rightful business owner, are even aware of the breach.

Blake walked us through one common scenario:

[Blake says: “So one common scenario where you'll see businesses subject to business identity theft is criminals will go in and change the managers and officers of the business on the secretary of state’s website. Each state has a governing body that controls how the registration of businesses go. In most states that’s the secretary of state, that's the way it is in Nevada. Utah has a different version. Same thing with Arizona. They have a corporate commission or something like that, but the idea is all the same: You can basically just go online, pay a fee and you can change who the manager or the president of the company is. 

And so they'll change that. Then they'll go to the bank, the bank will look them up and say, 'oh, if you are the authorized signer for the business, sure you can open up a credit line. This business has a lot of history. So, yeah, it looks great, we'll do that' and they'll get it authorized. Another way you'll see it happen is they'll forge documents saying that the business has been sold or at least updated with the secretary of state. And so they'll have a fake document that says that you have released your right to act as manager and that they are the new manager or the new president of the company. This is also the way that some companies that are your registered agent offer services to keep you anonymous. They'll be listed as the president or the manager or whoever.

And then they have a document that they've signed giving you full authority to act on behalf of the business. And that's just a little sketchy because one, the other person listed is the manager or the president of the company so they can actually revoke that at any time without your authorization. And they maintain control. So it's just another reason why you should have a business monitoring service, but also you should have a registered agent who's going to do things the right way and not have anything to be sketchy.

You know, having your name not show up is all some risk. You know, you want to keep some anonymity, but there's other ways to do that without having to fully assign that authority over to somebody else."

Also, Blake warns that anyone who acquires an existing business after the original owner passes – whether through a succession plan or after probate – should be beware of yet another type of scam.

“You'll also have the risk of somebody just coming in and saying, ‘hey, I'm the representative for the business to the family and I can take over this business and help you keep it up and running as kind of a consultant.’ When that happens, the new business owner could sign the business over to the ‘consultant’ only they don't realize that they have actually signed it over to somebody else. When that happens they lost the business and all the assets associated with it,” Blake says.

Planning for your children

Even if you don’t own a business, estate planning is vitally important if you have children. Without a will, the courts will decide who becomes the guardian of your minor children. Or, in another nightmare scenario, your children could inherit your substantial assets with no one (or someone who is more interested in being paid than in taking care of your children) to monitor how those funds are used.  In such a case, the assets can be spent quickly in ways that you never intended.  

“If you don't plan in advance and your children are minors, they will get all of your money as soon as they turn 18. So if you have a half a million-dollar life insurance policy plus other assets and the kids get that at age 18, it's going to last them as long as it takes to get to the nearest car dealership,” Blake says. 

“That’s obviously not the best scenario. So, number one, it’s important to make sure your minor children go to the right person. And number two, we can structure it such a way that when they do turn 18, they don't have access to all of the money right away. You can stipulate that you want them to go get an education first and we'll pay for the education, or let's spread it out over a couple of years where you want them to be a contributing member of society. "

“You can set it up so each year they get a match for whatever their tax return says. That way, they need to at least have a job. There are creative ways and we can help with that.”

Expedited service 

In these times when we are feeling less secure than usual, we don’t want to wait for months to get our estate and business succession planning completed.  Trusted has managed to expedite the process, protecting you from predators in a much shorter period of time.

“We've developed a system that works really well and we can get documents done within two weeks,” Blake says. “That's our goal after our initial meeting. We want to have documents in your hands to be signed in two weeks.”

If there’s a special circumstance, such as you want to get your affairs in order ahead of a planned surgery, “we can expedite that,” Blake says.

Typically, Trusted Estate Planning Attorneys charge $1,800 to draw up the documents for an individual or $2,000 for a couple – and both prices are below the typical industry standard. 

“That includes your trust, your will, your health care power attorney, your financial power of attorney, and includes the deed for your primary residence into your trust,” Blake explains. “And the only way that it really goes up in cost is if you have multiple properties or multiple businesses we have to move to that trust.” 

But before you set up your trust, you need to be sure that your business is registered properly.  For new business owners, Trusted has a special offer to set up your LLC or whatever structure is right for your business. If you call them at 702-616-6001 (Las Vegas) or 801-252-601 (Utah) and mention seeing the offer, you get an additional 10% off.

However you look at it, estate and business succession planning provides peace of mind, not only for you, but for your children and other family members.  Don’t wait until it’s too late. 

More about Blake: 

Blake Johnson has known most of his life that he would be working in the estate planning and business realm and based his schooling and work life accordingly. As an undergrad at BYU in the Marriott School of Management he studied Business Management and Finance before attending law school where he learned how to handle the financial side of trusts, businesses and estate plans. He then went on to graduate from the Paul M. Hebert Law Center at Louisiana State University with his JD and a graduate degree in comparative law where, although you don’t have a major in law school, Blake’s was Trusts and estate planning.