What is estate planning? It’s the process of taking inventory of your assets and determining how you’ll distribute everything when you pass away in an effective and optimized manner. However, what happens in the future is especially important if you’re a business owner. You have to consider how you will take care of your employees and family members who work for you.
Your business is likely your biggest asset, and you don’t want all your hard work to go to waste. Our estate planning attorneys want to offer you four estate planning tips that’ll allow you to protect everything you’ve built.
Estate Planning for Business Owners Tip #1 – Discuss Your Business Succession Plan
As part of estate planning for business owners, you should consult with your family about what you want to happen after you’re gone. You should also have discussions with your business partners or anyone else affected by your decisions.
Succession plans work best when you’re open and honest with your heirs and business partners. Your goal should be to have everything you need in the proper place, so the transition goes smoothly. You want to prevent disruptions and ensure that your business continues to run optimally after you step away.
Estate Planning for Business Owners Tip #2 – Draft a Buy-Sell Agreement or Assignment of Rights
Buy-sell agreements are legal documents that approve the reassignment of ownership. Therefore, they are one of the documents that should be in your estate plan. Many businesses have multiple owners and buy-sell agreements can help eliminate some confusion. With a buy-sell agreement, if one of the partners passes away, the others won’t have to determine who owns what.
Buy-sell agreements allow the following to happen when you pass away:
- Your partners can acquire your share of the business
- Your heirs can inherit your share
- Your share can be sold to third parties
- Prevention of third parties from acquiring your share.
Buy-Sell agreements should always be part of your estate planning for business owners. Your job when crafting an estate plan is to help facilitate the transition of ownership. Ultimately, you have to put considerable thought into how the surviving owners will settle your share of the business after you pass. For simpler business structures that are closely held or solely held by you, a simple assignment of economic right in the business to the trust may suffice as well.
Estate Planning for Business Owners Tip #3 – Become Tax Efficient
Whether you’re estate planning for large business owners or estate planning for small business owners, taxes are always a significant responsibility for business owners and civilians. With your estate plan, you have to think of ways to avoid paying high estate taxes. You should carefully consider which parts of your business may push you over the estate tax exemption limit and then take steps to reduce your tax liability. Placing your business or other parts of your estate in specialized trusts can also help you become more tax efficient.
Estate Planning for Business Owners Tip #4 – Make Sure You Have Enough Insurance
Liability and life insurance are game-changers, especially if your heirs are inheriting the business. Insurance can provide them with extra liquidity that serves as a financial buffer. This way, your heirs can implement your succession plan with minimal impact on the business. Furthermore, having liability insurance will protect your heirs from lawsuits brought upon them by customers or employees.
How Jenkins & Jenkins Can Help Business Owners Create an Estate Plan
Here in San Diego, we provide estate planning services for business owners preparing for the future. We’ll ensure you explore all your options to protect your family and business. Ultimately, our job is to help you craft a plan that accommodates all your needs. Contact our offices today, and we will answer any questions you have about estate planning.
Testimonial from Tina, Satisfied Estate Planning Client
Attorney Michael Jenkins was a referral for us and after doing several interviews with others, we selected him for his responsiveness, his understanding of our needs, his ability to work with some very complex trusts and estate planning, his professionalism, and his compassion. We had provided our situation; scenarios and he came fully prepared with answers to our questions in the initial consultation -which was at no charge. He recognized our need for urgency and delivered as promised, making himself available to us whenever we needed to gather clarification and understanding. We initially were looking for someone who could speak in a different language that my parents could better understand, but we felt a true sense of care and trust after meeting him. He was very patient, and we never felt rushed. I recommend him and firm highly based on the customer service we received, his expertise, and he was a true pleasure to work with.
