5 Estate Planning Tips for Business Owners

September 13, 2023
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Estate planning should always be a top priority for anyone, regardless of age, wealth or family situation. The older you get, the more important it becomes to have a proper estate plan in place. Unfortunately, you will not be around forever. However, the estate planning decisions you make now can make a significant difference long after you are gone.

Estate planning is even more of a priority for business owners. Entrepreneurs have an extra level of planning that must be done. You are not only deciding how your personal wealth and assets should be managed after you pass. You also have a business to consider. What happens to it when you die? How does your role in the company affect business when you are no longer around? What steps should you take when planning for an uncertain future?

Here are some of the best estate planning tips for business owners:

Understand the Different Aspects of Your Estate Plan

One major issue when estate planning for an entrepreneur is separating personal assets from business assets. Someone in your family may inherit your financial stake in your company, but they may not be taking over your role in the business. A proper estate plan needs to factor in your different business assets and succession scenarios, along with your personal estate issues. Your estate plan will naturally be more complex and have multiple facets that need to be structured to cover every base.

Create Exit and Succession Plans

Depending on your role in your business and the nature of the company, you should have an exit plan in place. You may decide to retire long before you pass away, or you may stay there until the very end. Exit planning, succession planning and estate planning should all work together hand-in-hand. Plans should be in place for your business to account for different scenarios, whether you are voluntarily moving on or something unfortunate happens first.

Define Family Roles in Your Business

This may be an issue that you review often when revising your estate plan. If any family members or other heirs are inheriting financials stake in your business or taking over key management roles, the details should be featured in your estate plan. It should be clear how your business will be affected after you are gone. Of course, family situations and roles can change quite a bit as time goes on, so this is why you should revisit this part of your estate plan often to ensure smooth transitions.

Revisit, Revise and Plan for Contingencies

No estate plan should ever be truly set in stone. You need to revisit it at least once a year. Revisions may need to be made on both the personal and business sides of the plan based on changing conditions, family situations, business leadership, wealth management issues, tax codes and various other factors. Your estate plan may include certain contingencies and options to protect your assets, your heirs and/or your company. You do want to think through every possible scenario to plan for different variables.

Seek Professional Guidance

Estate planning can be very complex and you want to make sure not to miss any important details. This is especially true for business owners and investors with more complicated assets to distribute. Seek the help of a professional advisor with specific estate planning experience. Ultimately, you may end up working with a wealth management advisor, attorney and tax planner on different aspects of your estate plan.

It starts with taking the first step. Whether you are creating your estate plan from scratch or looking to update your current plan, Illumination Wealth is here to help. Contact us today to set up a no-obligation introductory consultation with one of our most experienced advisors. We can help you with both business and personal estate planning.