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.
This article written and published by:
Legacy Assurance Plan
8039 Cooper Creek Blvd
University Park, Florida 34201