Jennifer C. Rydberg, Attorney at Law
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Equitable estate distribution for Kent entrepreneurs

Parents naturally tend to think that since they love their children equally it makes sense to set up an estate plan that distributes assets equally. As some Kent business owners may have already considered, equal distribution of estate assets may not necessarily lead to desirable results when the bulk of the estate consists of illiquid business assets. An equal distribution of business interests among heirs may instill resentment in those who have played an active role in building the business toward those who have demonstrated less interest.

There are a number of different ways for business owners to address business succession through estate planning, but one easy approach involves simply purchasing life insurance that can be used to equalize estate distribution while passing on business assets only to those heirs with the desire to maintain operations.

For example, a family that wants to make sure the entire interest in a business passes to one of two children could purchase a life insurance policy that will pay out an equal amount to the other child upon the parents' deaths. If the business assets amount to $1 million, a policy of equal value allows for an equitable gift to the child who will not be receiving any interest in the business. The child with an interest in the family business receives appropriate recognition and neither child has cause to resent the distribution of business assets.

Different family situations may require more elaborate arrangements, but the basic principle can be adapted to address a wide range of circumstances and estate planning goals. In some cases, the establishment of a trust to receive life insurance proceeds can provide inheritance tax advantages and help avoid some of the complexity of probate proceedings. An experienced estate planning attorney can help Washington business owners assess the alternatives to equitably divide their estates and support the continuation of a family legacy.

Source: Forbes, "Inheritance Equalization: Planning ahead now to reduce the burden for your kids later," Steve Parrish, Jan. 16, 2013

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