4 Key Elements Of a Small Business Owner’s Estate Plan

If you have ever had the thought of leaving your company to your family but haven’t added your business in your estate plan, then it could become a troubling time for your heirs—and for your business’ team members and clients, as well.

To ensure that your company is passed to your family in the way you that you want, you will need to create an extensive estate plan for business owners.

This plan will most likely include some of the following key elements: 

You may think a will would be able to protect your business assets, a living trust will be able to keep your business out of court, a will won’t. While a will is able to assist in the division of your assets when you die, a living trust is a separate legal entity that more-or-less owns your share of the business, without any tax consequences or change of control until after your incapacity or death. 

Unlike a will, assets put into a living trust are not subject to probate. It not only avoids the hassles of probate; it also keeps your business affairs private. A living trust has several other advantages over wills: It will transfer your assets immediately upon your death in the privacy of your attorney’s office; it also allows you to designate a successor who will take control of the business; and it saves on estate taxes, court costs, and legal fees. 

2. Life Insurance 

Unless your business is able to generate a significant income—and will be able to do so after you pass—that income will most likely not be enough to be able to financially provide for your family. To make sure your heirs, team, and customers remain taken care of, invest in life insurance to provide assets and money while your family manages your affairs. 

3. Buy-Sell Agreements 

If your business has multiple owners, you’ll want to think about getting a buy-sell agreement. This agreement will make sure that upon certain conditions—like the passing or disability of a partner—the remaining owners will be allowed to purchase your shares of the business, or your shares will pass directly to your heirs. 

This will prevent your beneficiaries from getting stuck owning a business they never wanted and aren’t able to sell it, while also protecting your remaining partners from being forced to deal with new owners they don’t trust. 

4. Succession Plan 

If you are wanting to pass control of your company to your family, you’ll need to have a succession plan and make sure that your heirs know how to successfully run the business you’ve created or sell the company without you. 

If you want a specific family member (or team member) to run the business, you should designate that person in the plan, and then explain exactly how and when the business will be transferred to that person. If you want the business sold, you’ll want to start planning for that as soon as possible. 

We will help you through the process, allowing you to relax, knowing your family, team, and customers will be properly taken care of. 

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