Summary: Almost everyone has a significant need for an estate plan. Business owners, however, have an exceptionally high need for estate planning. As a business owner, a failure to engage in proper and complete estate planning won’t just potentially cause harm to your personal wealth; it could possibly jeopardize or destroy the business you’ve worked a lifetime building.
Even though a lot of people don’t have
plans (some surveys have placed this number as high as more than 50%,) many
people actually do care what happens to their assets after they die (even if
they don’t have a plan.) Taking control of your legacy and putting down on
paper a plan dictating your goals for your wealth is important for most anyone.
It is, however, exceptionally important for anyone who owns a business. Failing
to plan if you’re someone who doesn’t own a business potentially means creating
uncertainty about your personal wealth. For business owners, failing to plan
may do more than that – it may cause severe harm to your entire business
organization and everyone in it.
There are several potentially useful
steps you can take as part of your estate plan in order to ensure the continued
well-being and seamless functioning of your business. Like most anyone, your
plan should include a will and powers of attorney. As is the case with many
non-business owners, your plan may also benefit from a living trust. While your
living trust may help you avoid the potentially expensive and time-consuming
process of probate administration after you die, your living trust (or your
financial power of attorney in plans that don’t include a trust) can also be
very beneficial during your lifetime. If you become ill or injured and are in a
state where you cannot make decisions for yourself, your living trust or power
of attorney can help you avoid the legal process of guardianship and/or
conservatorship. These legal processes can be expensive and stressful for you
and your family and, what’s possibly worse for business owners, may result in
the court appointing someone who may not agree with your wishes regarding the
operation of your business.
There are other things that can be
useful parts of your plan that are unique to business owners. One is a
“business succession” plan. This is a formal, written declaration about how and
when the transition of your business should occur. This planning tool can help
ensure that your business transitions from you to the person you want to
succeed you in the most efficient and seamless manner possible. For businesses
that are partnerships or certain other small businesses, a “buy-sell” agreement
may be helpful. This agreement will lay out the terms for the re-allocation of
your ownership interest in the business should you become incapacitated or die.
Another tool that business owners may
consider in order to ensure the continued seamless operation of their entities
is life insurance. Specifically, there exists something called “key person
insurance.” If you have an integral or “key” executive within your organization
whose death or incapacity would put your business’s operations in a serious
bind, you may decide to purchase this type of insurance. This policy pays a
benefit to the business upon the death of the key employee, providing the
business with a cash benefit during that period in which the entity seeks to
replace that key employee.
This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com.
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