When you own a business, you have a lot on your plate. You are spending your time, money and energy on building your business and trying to increase profitability. It can be hard to think about what would become of the business should an accident happen or a major health issue get in the way. How is your business tied into your estate plan?
Illumination Wealth has put together this list of estate planning tips just for business owners and entrepreneurs:
Everyone should have a last will and testament that outlines what will happen with all personal assets should they pass on. It is the most basic estate planning document you can have, and a will is something every business owner should have. It allows you to determine who will take over the business. If things aren’t determined in advance through a will, it could be catastrophic for any business partners, clients and employees at the company.
All business owners must declare “Power of Attorney” to a specific individual who will handle all legal affairs for the business in the event that the business owner is no longer capable. If not, the court will decide for you and that may not be in the best interest of your company.
One of the most costly things that can happen after a business owner passes is estate taxes. They can be as much as 50% of the business’s total value and are usually required to be paid within a 9-month period. This can be catastrophic to the business. There are certain tax breaks and strategies that can help and another good idea is to hold your personal shares in the business in a charitable remainder trust. Talk with your financial advisor about your options to minimize posthumous tax liabilities for your business.
Speaking of charitable trusts, they are a good way to take a more philanthropic approach when it comes to how your business assets are handled after death. A charitable trust will help reduce tax liabilities and the assets can be earmarked to support specific causes that may be important to you and your family.
You should have at least a basic succession plan laid out just in case something happens. If you were in an accident today, who would take over the business tomorrow? Having a succession plan in place will help keep the business running smoothly when you are not there.
Should you pass, you want your important records and documents to be as organized and accessible as possible for your successors. This includes your business plan, succession plan, will, all financial documents, insurance policies and everything else important to your estate.
Life insurance policies can not only help your family, but you can take out a policy to help your business should something bad happen to you. Many small businesses do not have the liquidity to survive an owner passing suddenly. A life insurance policy can name partners and successors as the beneficiaries. Those proceeds can be used to cover your stake in the company and provide much-needed capital.
These are some of the most important things you should be thinking about as a business owner. Whether you own a small business or a larger company, it’s important to have a proper estate plan that covers all the most important details of your business should something happen to you.