“Estates a la Carte”: Restaurant Owners – A 3 Course Catastrophe

One of the more-challenging clients for estate planners is restaurant owners. While owning a restaurant is difficult enough during life, the problems that face these professionals at death are equally complex, time consuming and expensive.

First, Appetizers: Most restaurant owners spend most of their money on additional restaurants. This creates a major problem with estate liquidity, particularly if they happen to own the real estate where their dining establishments are located (typically in high-tax areas). Otherwise, the establishment is locking into a long-term lease to which the lessor has the right to pursue rent for the remaining term of the lease against the deceased owner’s estate. In either case, substantial cash funds may be needed but are not available.

Next, the Main Course: There may be substantial physical cash owned by the decedent. Cash is one of the WORST estate assets to have: While people horde cash to avoid paying taxes, cash is easy to abscond with. The owners death almost inevitably leads to a “run on the safe” where the first individual who arrives reaps the benefits of untraceable estate assets by “grabbing and running” with the cash, and there is little proof to reverse the theft.

Lastly, Dessert: Many restaurant owners are too busy after working 70 hours a week to be enthusiastic about meeting with an attorney to properly handle their estate affairs. This is the final, fatal flaw, since many restaurants are owned by multiple individuals, valuations are difficult to determine, and many times the owner’s spouse or children are not interested in continuing running the business. This leads to substantial estate depletion both in terms of money paid to attorneys and inefficient asset transfers.

Paying the Bill: Much like the rest of their financial affairs, there are no easy answers for a restaurant owner’s estate plan. However, working with an attorney cas ultimately save large amounts of money on both estate administration and capturing as much wealth as possible to pass on to family members.

Q for You: What estate issues can you foresee taking place if you were to pass away?

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