As a business owner, you pour everything you have into building and growing your enterprise. But have you considered what happens to your business and personal assets if you become disabled or after you are gone? An estate attorney can help you prepare your estate plan to ensure your hard-earned success is preserved and can continue on when you no longer can. In this article, we’ll cover the key aspects of estate planning every business owner should know to secure their legacy.
Disclaimer: The information provided is intended for informational purposes only and should not be construed as legal advice.
Failing to have a plan can lead to significant challenges and consequences for your business and your loved ones. Imagine that you have been in a severe car accident and are lying in the hospital, unconscious. What would you immediately be concerned about if you were not there to run your business? Here are some key concerns that business owners may face if they do not have a proper estate plan in place:
1. Check Writing & Payroll Issues
This can be a nightmare for single-owner businesses with employees. If you are the only person authorized to use the bank account and you are not there, how will your employees and vendors get paid?
2. Tax filing Issues
Who will know what documents your accountant needs to file your tax returns? Who has the authority to sign and file tax returns and make tax payments? Failure to file timely can result in penalties and interest.
3. Lack of Leadership
Without a designated successor, your business may struggle to find capable leadership, affecting its operations and profitability.
4. Internal Conflicts
Family members or business partners may disagree on how the business should be managed or divided, leading to disputes and potential litigation.
5. Forced Asset Sales
Heirs may need to sell business assets or other valuable property to pay taxes, which can harm the business’s financial health.
6. Reduced Inheritance
Higher tax burdens can reduce the amount of wealth passed on to your heirs.
7. Creditors’ Claims
Without proper planning, your assets may be subjected to creditors’ claims, reducing the estate’s value.
8. Litigation Risks
Disputes among heirs, customers, or business partners can lead to costly litigation, further depleting your estate’s resources.
How do you protect the business you have worked so hard to build?
Start with a plan – but not just any plan – a well-drafted and customized estate plan. A customized estate plan includes several documents that work in conjunction with each other to protect your assets and provide for your wishes. Key components include:
- Last Will and Testament to instruct on how your personal assets are distributed at your death.
- Revocable Living Trust to potentially avoid probate and provide a quick and smooth transfer of assets without Court supervision.
- Powers of Attorney to name someone to manage your legal and financial affairs and business interests if you cannot.
- Advanced Healthcare Directive (“Living Will”) to inform your loved ones of your end-of-life preferences in case of incapacitation.
- Appointment of Medical Proxy to pick a trusted person to make medical decisions for you when you cannot.
- Operating agreements to establish who has the authority to manage your business when you are incapacitated or gone.
- Buy-sell agreements to outline the transfer of ownership in case of death or disability.
How can an Estate Attorney help?
A well-thought-out succession plan ensures that your business continues to thrive after you’re no longer at the helm. Navigating the complexities of how your assets are handled during your incapacity or after your death requires professional guidance. Estate planning attorneys can help you consider who you would pick as your successors, particularly choosing a successor with the skills and knowledge to run your business. The Estate attorney can help you identify areas where you might need to prepare your successor with proper training and mentorship.
The estate attorney can also make you aware of changes in the law that you are required to comply with. They can also you minimize tax burdens for your business and your heirs. Strategies include establishing a gifting plan to prevent excessive estate or inheritance tax inclusion at your death and utilizing trusts to manage and distribute assets in a tax-efficient manner. Further, an estate attorney can help you identify if purchasing key-person or life insurance is a strategy to help your business have the funds to keep running and to buy out your family member’s right to take ownership of your business when you pass away, ensuring that both your business and family are financially secure.
Keep Your Plan Current
Life and business circumstances can change as time passes. All business owners should regularly review and update their estate plan to ensure it remains aligned with your current situation and goals. Key events that warrant a review include changes in business ownership or structure, significant financial gains or losses, marriage, divorce, or the birth of a child.
Don’t leave the future of your business and family to chance – review your business and estate plan before it’s too late. Our experienced attorneys are here to help you create the custom plan that reflects your wishes and protects your loved ones. If you are looking to secure your legacy and ensure your business continues to thrive for generations to come, contact us to help you create the plan that is best suited for your needs.
