Business Trends & Legal Needs by General Counsel, David Jarvis

BY DAVE JARVIS, NMA GENERAL COUNSEL

Our San Diego firm has catered to the business, real estate, and estate planning legal needs of our business clients for over 40 years, and for the last 22 years I’ve been lucky enough to be a part of our firm’s growth and success. In that time, I have seen many business trends and legal needs. This article is hopefully the first of many for The Voice outlining the current trends and legal needs relevant to the closely-held business needs of our clients.

Unfortunately, the topic of this article is something people generally don’t like to discuss or even think about: death. However, my goal is to emphasize the need, value, and importance of planning for this inevitability.

People that own businesses, real estate, and other assets need estate planning. Good estate planning provides for certain outcomes and performance of testamentary wishes and desires, can save families a lot of money, and is a prudent action to take for people that own businesses, real estate, and other assets. Clients often confide to me a big concern is the government getting involved in the event of their passing. However, it’s the attorneys you really need to keep an eye on when it comes to distribution of estates after the death of a parent.

With many of our business clients, however, good estate planning is only part of the planning process. The other component is proper succession planning outlining proper protections for surviving spouses, while also creating a clear path and opportunity for the kids and future generations to see continued business success following the death of their parents. I have seen many family disputes and conflicts due to the absence of clear directions from parents regarding future operations and ownership of businesses. Worse, the financial success of the businesses often suffers during these conflicts and disputes. Business succession planning is frequently an independent component of estate planning. Buy-sell agreements, granting children options to purchase an ownership interest in the business, and many other planning options exist. For many years, our firm has emphasized incorporating many of these business concepts directly into our clients’ estate planning documentation to provide clarity regarding future business operations. There are many benefits in doing so, ranging from:

1) Tax planning considerations; 2) Spousal protection and sheltering inheritances; 3) Maximizing the continued success of business operations; 4) Avoiding disputes between the kids down the road; 5) Equitably addressing the role of each child in your estate plan; and 6) Avoiding litigation and in general avoiding unnecessary attorney’s fees.

There is a downside to this type of succession planning: it costs money to create, implement, and maintain. This cost, combined with people’s natural hesitation in confronting their inevitable demise, results in this planning being frequently overlooked or unprepared. And while there are times the family amicably works through these business succession issues, this is a common area of family disputes, litigation, and tremendous cost and expense down the road. And sadly, these types of disputes often result in the kids no longer having Thanksgiving dinner together after their parents’ death.

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In his 20-year career, Dave Jarvis has formed many nonprofit organizations, including charitable organizations, churches, educational nonprofits, homeowners’ associations, and trade organizations. He also serves as a board member for the Boys & Girls Club of Greater San Diego.