In this episode host, Jack Marino Jr. speaks with Artie Pennington, a business and estate planning attorney, about why business owners should have an estate plan. This episode will guide you through the essential things you need to know when creating an estate plan for your business as well as for your personal estate. You’ll also learn what happens to your assets if you do not have an estate plan in place.
Hunt, Pennington, Kumar, Dula–– Reach out to Artie’s firm for a consultation about estate and succession planning.
David H. Maister — Artie Pennington recommends the work of David Maister if you’d like to learn more about how to operate as a professional.
1) You need an estate plan for your business that is based on your desired outcomes. This plan will protect your business and your family.
2) Everyone needs a will. Start with a will and a trust when you begin your personal estate planning.
3) Don’t assume that everything will automatically go to your spouse and kids. Make a plan to protect them.
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[2:00] – How did Artie start his entrepreneurial journey?
- He worked in his grandparents’ small hardware store as a teenager.
- He joined a high tech startup.
- He later got in on the ground floor of a professional services organization.
- In 2008 he went back to law school.
[3:44] – What caused him to make the transition from the high tech industry to practicing as an attorney?
- High tech is a young man’s game.
- He went to law school at night for 3.5 years.
[5:47] – What did he like about law?
- Law is the quintessential professional service.
[6:32] – Learn more about Artie’s firm.
- They formed three years ago to focus on intellectual property and business.
- They have all had different professions prior to being attorneys that they use to help business owners.
[9:36] – What areas of expertise does the firm focus on?
- Intellectual property law, business law, and estate planning.
[12:27] – What is Artie’s specific area of focus within the firm?
- Intellectual property and patents.
- He does quite a bit of estate planning work and probate work.
- He also works on the litigation side.
[13:09] – What does a typical client look like?
- For estate planning, clients are often small individuals that realize they don’t have an estate plan in place.
- They deal with many small startups in Austin.
[15:42] – Why does a small business owner need an estate plan?
- Solopreneurs need to protect their business in the event that something happens to them.
- A succession plan would also include insurance to support your family.
[17:30] – What components make up a proper estate plan for a business?
- Understand what your desired outcomes for your business are at the end of the day.
- If your partners all have spouses, you must have a plan for that.
- Begin with the end in mind and work backward from there.
[19:00] – What types of scenarios would trigger a succession plan?
- Death, incapacity, disability, divorce.
- With law firms, there would be a partnership agreement.
- You must consider things from a personality perspective.
- If your clients don’t know your partner, they may leave when you experience one of these triggering events and that could change the business valuation.
[21:26] – What other components do you need to arrange for personal estate planning?
- Everybody needs a will.
- The state has a plan for all of your effects if you don’t decide what to do with them.
- The will can provide legal authority for the future guardianship of your children.
- You also need a living will in case you are incapacitated.
- Everybody needs some level of planning.
- About 56% of people don’t have a trust in place.
[26:38] – How does a buyer pay for the business if we create a buy/sell agreement?
- The most popular option is to have insurance to cover the unexpected.
- Sit down with your tax attorney and a knowledgeable CPA.
- Even small companies would benefit from some form of insurance.
[30:28] – What else do we need to round out an overall succession and estate plan?
- You need a will.
- You need a living will with physician directives.
- You need a trust plan. If you are a property owner, you must have a trust.
- A will with a trust is often the place to start.
- Probate is a public process. If you’re a private person, you will want a trust.
- When they create the plan, they do a review of your assets and assess some risks.
[35:22] – What happens if I don’t have an estate plan? Assume I’m married with kids. Won’t everything just go to the spouse and kids?
- Maybe. It depends.
[36:09] – What happens in the event of a simultaneous death and I don’t have an estate plan?
- If you have minor children and you have not specified anything, then the state will have to assign a guardianship and put your assets in a trust with a trustee assigned by a judge.
[37:32] – Jack and Artie discuss some complexities that can arise with life estates.
- If you owned a property prior to your marriage, that’s not community property.
- If you have two children from a prior marriage, your current spouse would get a life estate.
- In a life estate, you can only sell or transfer what you own.
[41:13] – If I have a special needs child, what do I need to plan?
- You need to set up a special needs trust with appointed trustees.
[44:00] – What’s the most common legal mistake business owners are making?
- Trademark is typically the most valuable asset a small business has and it’s also the quickest way to get into a lawsuit because people don’t do their due diligence.
[48:55] – What kind of services does Artie offer if someone wants a review?
- They’ll do a free 30-minute consultation.
- Some services are hourly, others are a flat fee.
[50:06] – What’s the best way to reach Artie?
- Call him at (512) 766-6082
- Visit hpdklaw.com
[50:40] – What does Artie do to keep his edge?
- Lots of reading. He has a lot of live conversations with other attorneys.
[52:08] – Who has been the most impactful person in his life so far?
- His dad, a very pragmatic and stable person. Artie was raised to look at things from all angles.
[53:55] – What is one book he recommends?
- The work of David Maister.
[55:18] – What does he do in his free time?
- He likes to play the guitar and piano. He reads, cooks, and travels.
[56:06] – What does financial freedom mean to Artie?
- Being able to make life decisions without being overly stressed over the financial impact.
[56:47] – How does Artie Pennington want to be remembered?
- As a fair, reasonable, individual with high integrity no matter what.