Question: Should I use my S Corporation in California for my Business Estate Planning?
I am trying to figure out if I should start a corporation with all my assets put into the corporation. Do I have to have my children in the corporation from the start or can I leave the assets to an estate?
Do I have to change titles and other documents when putting assets into the corporation?
Answer: I would have to say that probably the worst place in the world for all of your assets would be inside a corporation!
Here is how I would think about the question. I would have to say that probably the worst place in the world for all of your assets would be inside a corporation – California S corporation or C corporation.
Here is the reason why: corporations get sued all of the time. If your corporation gets sued and loses, the creditor has the right to collect the damages of the lawsuit from the corporation. In many cases, the creditor collects against the insurance that the corporation has purchased and the matter is over.
However, if the damages exceed the value of the insurance policy, the creditor will then next turn to the assets of the corporation.
If you placed your all your personal assets inside the corporation, the creditor would be entitled to collect against those assets. In the case of a big enough lawsuit, you could lose everything.
I think that a revocable family trust will most likely achieve the goal that you are seeking. By placing your assets inside a revocable trust, you can do the planning necessary to pass your assets to your heirs without unnecessarily placing your personal assets at risk inside your business.
What kinds of Estate Planning Documents should I consider?
If you do decide to prepare your basic Business Estate Planning documents, I recommend that you create the following documents at a minimum: a family trust, pour over wills, advanced health care directives and powers of attorney for property management.
If you need assistance in better understanding business estate planning for your corporation, please feel free to give us a call at the Incorporation Attorney at 714-634-4838.