You know the importance of doing estate planning for the future of your family. You can protect your assets and look out for your loved ones when you are no longer around.
This takes on an even greater significance when you own your own business. Not only do you need to think about your own family, you also need to consider your business needs.
After pouring so much of your time and effort into your business, you probably want to protect its assets and make sure your life’s work is able to carry on after you are gone. It’s important to consider your employees too.
Here are four facets of business estate planning to consider. A financial advisor can help you with all of them.
Estate planning involves doing some planning for the future, beyond your own lifespan, to protect your financial assets, business, and dependents. You should work with your financial advisor, and probably an estate attorney as well, to draw up the documents in order to protect your estate.
These are some of the same documents you might use for personal estate planning, yet can protect the interests of your business and business assets too.
Some of the estate planning documents to consider include:
- Last will and testament: identifies who inherits your assets
- A living trust: names a trustee who can manage personal and business assets for your beneficiaries
- Power of attorney for both medical and financial needs: identifies a person to take over decisions for dependents or your own care if you are unable
- Advance health care directive: identifies your wishes for health care
You want to consult with your financial planner and business attorney about all of these options. How you structure these documents will depend upon how you’ve structured your business.
2. Succession Plan
If you are like most business owners, you have poured your heart and soul into making your business successful. You want to have a plan in place in case you are unable to carry on running the business. There are a few possible succession plans to consider.
Part of estate planning and working with a financial planner is having a plan for retirement. You need to consider what you will do with your business when you retire. Will you sell it? Will a family member step in and take over? Will another member of the business team step in to run the business?
You also want to consider the scenario you will choose if you become ill or incapacitated and are unable to run your business. Who will step in when you are unable?
Options may include:
- Handing the business on to a family member
- Selling the business and passing on the proceeds to your loved ones
- Passing the company on to a trusted partner or employee
- Making the business employee-owned after you die or step down
Whoever you hope to take over when you’re gone, you’ll need to discuss your plans with them. Are they ready and willing to handle the responsibility? It’s wise to craft a buy/sell agreement in advance, making your plan official.
Each of these options comes with important legal and tax implications.
As a business owner, you probably already spend a fair amount of time addressing your insurance needs. When working on your estate plan, you may want to include a life insurance policy for your business partners, which will allow them to buy your shares in the event of your death.
As the owner, you can also seek specialized insurance to protect your interests. Check into key person insurance as part of your estate plan. This will be paid out in the event a crucial member of your business dies.
Any comprehensive estate plan will address taxes. You want to save your business and your heirs paying unnecessary estate taxes. One way is by using a living trust instead of a will, which keeps your assets out of probate and reduces tax burden.
It is always critical to work with a financial advisor and estate planning specialist in order to minimize the tax burden your business will face should you die.
Get Help Making Your Plan
While the idea of planning for when you are no longer alive might feel daunting, preparing a comprehensive estate plan protects your business and your loved ones alike. Even if you’re young and planning to stay at the helm of your company for a long time, it always pays to have a plan in case of the unexpected.
If you need help with your estate planning, our financial advisors can work with you to establish a plan so your best interests are protected. Contact us today for more information about our financial and estate planning services.