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Buy-Sell Agreement In Family Business

January 29, 2020/in Business Law, Estate Planning /by Michael Lonich

You may have heard of shareholder agreements but have you heard of the more specific Buy-Sell Agreement? This is a fundamental succession planning tool when it comes to owning and operating a business. It is especially helpful in the case of family businesses. 

What Is A Buy-Sell Agreement?

Similar to how a will dictates how assets will be transferred in death, a buy-sell agreement is a legal document that dictates where an owner or partner’s share of a business will go in the case of certain life events (i.e. death, retirement, etc.)

Having an agreement like this in place protects the family business. It protects family assets so that everything stays in the family’s control and so that nothing can be transferred outside the family. These agreements can dictate the succession of ownership.

How It Protects Your Family Business


Often, for a myriad of reasons, one family member or partner will try to sell their share of the business. This can cause issues if they’re trying to sell their share outside of the family.Without an agreement in place, they can sell their share off legally despite their intentions. Setting up a buy-sell agreement means you can dictate how shares and assets are transferred or sold. You can create certain stipulations that prevent a family member from selling outside the family. 

A married couple sets up precautions of a divorce in their buy-sell agreement

It can also help to have an agreement in place in case of a divorce. In California, any assets acquired during a marriage qualify as community property. This means that a spouse of the family owner can lay claim to their share of the family business. If you create a strict buy-sell document that requires the spouse to sell their share back to the company in the case of a divorce, you can prevent the share from transferring outside of the family. 

The agreements are meant to be put in place in preparation of certain life events. If there is a divorce, or a retirement or a death, a plan is in place to prevent chaos.  It is also great to have in place in the case of incapacitation which can include dementia or other things that prevent a person from acting in a mentally sound way or making informed choices. 

Having a buy-sell agreement can assure the long term survival of a family business. Why would you not want to have that added layer of protection? 

A Buy-Sell Agreement…

  • Ensures shares stay in the family
  • Creates a special space where shares can be bought and sold under dictated parameters 
  • Identifies potential future events and conditions that trigger the agreement. These will determine what happens to that share
  • Determines the valuation of business shares
  • Specifies the source of funding for the purchase. Where does the money that will be paid in the transfer come from? 

If you own a family business or a partner in one, you should consider the benefits of having a buy-sell agreement. That extra protection can ensure the longevity of your company. Live in the greater San Jose and Bay area? Set up your free consultation with Lonich Patton Ehrlich Policastri today.

https://www.lpeplaw.com/wp-content/uploads/2018/12/helloquence-51716-unsplash-min.jpg 1367 2048 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2020-01-29 20:36:202021-12-22 19:54:23Buy-Sell Agreement In Family Business

What Does A Trust Administrator Do?

January 15, 2020/2 Comments/in Estate Planning /by Michael Lonich

There are a lot of responsibilities when it comes to being a trust administrator. Most likely, if you’ve found yourself in this position, you didn’t know much – if anything – about trust administration beforehand. That can leave you with a lot of questions. The lawyers at Lonich Patton Ehrlich Policastri can shed light on your responsibilities and guide you through the administration process. 

To start with, what does a trust administrator do?

Trust administrators have a huge responsibility and little room for mistakes. This can be overwhelming. It’s good to know what kinds of duties you will be responsible for going into the process.

A trust administrator goes over the division of assets and the estate laid out on the trust
  • Valuation Of Assets One of the administrator’s fiduciary duties is to assess the assets in the trust and value them. Valuation allows one to determine the total worth of the trust.
  • Deducting Liabilities Once the assets worth has been determined, it is the trust administrator job to deduct all liabilities from the total worth. Liabilities include all costs and expenses of the trust. 
  • Record Keeping The administrator must keep track of the trust funds, taxes paid, and all correspondence. These records must be completely transparent as beneficiaries can view them at any point, but most commonly every six months or on an annual basis. 
  • Filing Income Tax Returns The admin is required to file income tax returns yearly for the trust. This is because trust assets are not able to be distributed tax free. However, there can be deductions. Any taxes due are paid directly out of the trust. Go here for some tips on fiduciary tax returns.
  • Maintaining And Monitoring Assets It is the duty of the admin to maintain the value of the trust and the assets within it. You need to keep track of spending and costs to try and maintain the worth of the trust over time. This requires you to keep track of and audit any change within the trust. This ties back into record keeping. 
  • Updating/Informing Beneficiaries Beneficiaries must be informed of the trust and updated on the status of the trust over time. The administrator must share trust expenses among other things with all beneficiaries after the initial notice that the trust exists and they are named a beneficiary. 
  • Safeguarding Interests This means it is the admin’s job to protect the assets against unauthorized spending or use. What is needed to safeguard an asset varies case to case. An experienced attorney can help you determine what’s right for your situation and how to best protect assets. Contact Lonich Patton Ehrlich Policastri for a free 30 minute consultation on trust administration. 

Along with their fiduciary duties, trust administrators are also expected to operate under certain principles.

A trust administrator shares openly how the trust is being managed with 2 of the beneficiaries.
  • Good Faith This means that the administrator must be honest, open and transparent in the way they manage the trust and in the ways they benefit from it. This is incredibly important as the beneficiaries have the right to sue the trust administrator if they fail to act in good faith. 
  • Prudence/Fairness This requires that the administrator operates under these two principles. Fairness ensures the admin avoids playing favoritism amongst the beneficiaries. Prudence requires that the admin does not make risky investments with the trust which also has a hand in safeguarding the assets. 

If you’ve been named a trust administrator, it’s normal to feel overwhelmed. There is so much information and it is a huge responsibility. Reaching out to an experienced estate planning lawyer can set you on the right path and prepare you for the duties ahead. Contact Lonich Patton Ehrlich Policastri for a free consultation. 

https://www.lpeplaw.com/wp-content/uploads/2019/09/sharon-mccutcheon-8a5eJ1-mmQ-unsplash.jpg 0 0 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2020-01-15 02:40:432021-12-22 19:54:51What Does A Trust Administrator Do?
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Located in San Jose, Lonich Patton Ehrlich Policastri handles matters for clients in northern California, specifically San Jose and Silicon Valley. Our services are available to anyone within the following counties: Santa Clara, San Mateo, Contra Costa, Santa Cruz, Monterey, and San Benito. For a full listing of areas where we practice, please click here.

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