Estate planning isn’t just about preserving some control over your life and your legacy. It’s also about taking care of those people who depend on you—including your spouse, children, and grandchildren. For business owners, you also have to think about employees—the people who depend on you, in a very literal way, for the food on their table!
Indeed, as much as you might plan for the perfect exit, you never know when something completely unexpected could happen. In such an event, your employees will face great uncertainty—unless, of course, you have everything laid out in a scrupulous estate plan.
But what estate planning steps should a business owner take? In this post, we’ll offer a quick guide.
Estate Planning Steps for Small Business Owners
Start with the Basics
Small business owners should start with all the core components of estate planning—the same documents that anyone might have. Three in particular stand out:
- Make sure you have a will that stipulates how you wish your assets—including your business—to be divided and distributed upon your death.
- Have powers of attorney to appoint someone to handle your business affairs and transactions should you die or become incapacitated.
- Finally, have advanced healthcare directives to legally select the person who makes medical decisions for you should you become incapacitated.
Minimize Your Tax Burdens
If you end up incurring massive estate taxes on your business assets, it could have a ruinous effect on the company’s financial standing. By working with an estate planning lawyer, you can figure out a strategy to keep tax burdens light, perhaps by dividing the business into different trusts.
Think About Family Dynamics
For family-owned businesses, there are some special concerns. For instance, what if one child wants to inherit the company but the other child does not? You’ll need to work with your attorney to keep things fair and to make sure there are no feelings of resentment—for example, you might leave the business assets to one child, all the other assets to the remaining child.
Create a Buy-Sell Agreement
This is mostly for cases where the business has multiple owners. A buy-sell agreement will stipulate who may purchase your shares of control in the company, under what conditions, and for what price. You can talk to your lawyer about the need for this document.
Invest in the Right Insurance
You’ll also want to have the right kind of insurance to safeguard you against unexpected scenarios—for instance, you’ll probably want to have both life and disability insurance. This keeps you and your family afloat even if you are not able to go to work due to accident, illness, or injury.
Outline a Succession Plan
Every business should have a succession plan, which outlines who takes over the business from you, and under what circumstances. Don’t ever leave this unsaid; even if everyone knows and agrees on who the heir is, it’s vital to have it in a legal document.
Talk to an Estate Planning Attorney About Your Business Needs
As you can tell, there are a number of estate planning considerations for entrepreneurs and business owners to make. It can be overwhelming, but you don’t have to make all these decisions alone. Estate planning attorneys can help you develop a clear plan that provides you, your family, and your entire team with peace of mind.
Singh Law Firm is pleased to work with business owners on all their estate planning needs. Reach out to us today to ask us more about the process.