How to deal with the death of a family member and still run your small business
As a small business owner, we have to deal with changes in tax law, local ordinances, environmental laws, workers compensation, etc. Just when we thought we had it all under control, something terrible happens. A death in the family. Oh my gosh you say? What do I do now? Well, since I’ve been there, let me tell you what you need to know.
When someone close to me died in my life, I was immediately plunged into an unknown state of emotion, frustration, anxiety, and pain. Needless to say, I was not good for my business. He couldn’t make decisions and was totally helpless not knowing what to do. After speaking with financial advisors, lawyers and accountants, all of which were extremely time consuming and expensive, I learned that I had much more to learn.
If you have a death in the family and suddenly realize you are in charge, gather the following information before consulting professionals. It will save you time away from your business and relieve some of the stress. Not to mention making it easier for your consultants and saving you money. Here is a list of things you may need to do to liquidate the estate and who can help you with the answers:
GENERAL PROCESS OF LIQUIDATION OF HERITAGE
Send for copies of death certificate
Gather information about estate assets: executor, trustee, family members, financial advisers
Meetings with estate planning attorney, accountant, financial advisors
Asset Valuation: Date of Death or Alternative Date Six Months Later: Executor, Trustee, Family, Financial Advisors
Get Appraisals for Real Estate and Business Interests – Executor, Trustee, Family Members
Preparation and Filing of the United States Form 706 Estate Tax Return: Attorney
Preparation of the Estate Liquidation Assignment Program: Lawyer
Preparation and Filing of Patrimonial Income Tax Return: Lawyer and Accountant
Family meetings to determine proper reallocation of estate assets
Consider: assets and amounts to be placed in A/B, A/B/C or other trusts, needs and abilities of surviving spouse, family gifting programs: executor, trustee, family members, financial advisers
Configure List of Purchases/Sales for Schedule D of the Applicable Income Tax Returns: Executor, Trustee, Relatives, Financial Advisors
Transfer and Change of Title/Record of Ownership of Estate Assets in Newly Created Trusts, Existing Trusts, Business, Joint or Personal Accounts: Executor, Trustee, Family Members, Financial Advisors
Preparation and Filing of Applicable Joint and/or Individual Income Tax Returns: Accountant
One of the most difficult parts of the estate settlement I encountered was filing the estate tax return. The following is much of the information you will need. Your accountant and attorney will ask for this, so you may as well have it ready.
INFORMATION NEEDED FOR THE UNITED STATES INHERITANCE TAX RETURN
OWNERSHIP NEEDS TO BE INDICATED FOR EACH HERITAGE ASSETS. FOR EXAMPLE: DECEDENT, SPOUSE, JOINT WITH SPOUSE, JOINT WITH OTHER COMMON TENANTS, COMMON TENANTS, LIMITED PARTNERSHIP, GENERAL PARTNERSHIP, PARTNER OF BUSINESS INTEREST
Real estate:
Description, Real Estate Appraisal, Valuation
Include personal residence here if applicable
Stocks and bonds:
Description, CUSIP number, Number of shares, Price per share, Face value of the bond, Number of bonds, Price per bond, Total value
Mortgages and Promissory Notes:
Face value and unpaid balance, date of mortgage or note, maturity date, manufacturer’s name, mortgaged property, interest dates, and interest rate
Cash:
Name and address of financial institution, account balance, account number, nature of account: checking, savings, certificates of deposit
Life Insurance: Insurance Company Name, Policy Number, Number of Deceased: Form 712 Company Life Insurance Statement, Include – Decedent’s Life Insurance receivable by or
for the benefit of the estate and receivable from beneficiaries other than the estate
Jointly owned property:
Information as above: interests held by decedent and spouse as sole joint tenant, all other joint tenants
Other Misc. Property:
In this section list the elements not included in any other;
previous section as –
Debts owed to the deceased
Business Interests
Interests in partnerships or unincorporated businesses
Other’s Life Insurance
Section 2044 (Prior Transfer QTIP) Property
Claims, Judgments
Rights, Royalties, Leases
Reversionary or Remaining Interests
Shares in Trust Funds
Household items and personal effects
Automobiles, Boats, RV’s
Annuities, IRA
Financial institution name,
Trustee or Custodian
Pensions:
Description Account number, account value, beneficiary information; Transfers During,
If applicable, all necessary information Life of Deceased:
Appointment Powers:
If applicable, all necessary information
In addition to all of the above information for your federal estate tax return, you will need information including descriptions, asset values, and expense amounts for the following allowable estate deductions:
funeral expenses
Expenses incurred in the administration of assets subject to claims
deceased’s debts
Mortgages and Bonds
Net Losses During Administration
Expenses incurred in the administration of assets not subject to claims
Bequests to surviving spouse
Charitable, public and similar donations and bequests
I hope you never have to use this information. But if you do, this will save you thousands of dollars in consulting fees, weeks of lost income from your business, and a lot of stress, hardship, and anxiety I went through.
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