If you’re a small business owner who hasn’t given much consideration to estate planning, then there’s no better time than the present. There’s no such thing as taking the next steps too early, and putting the proper framework for the transfer of your assets to beneficiaries upon your death (or retirement) is easier when done step by step instead of all at once. This isn’t something you want to put off until you’re on your deathbed. Do you need an estate plan? The short answer is yes, you absolutely do.
The longer answer is more complicated.
Exactly how much estate planning your business requires for tax purposes is a matter of its size. How much estate planning your business requires for your own purposes is a matter of choice.
Most people living in the United States don’t have a last will and testament or trust. That means that the transfer of your assets to family could be decided by the court system, a matter which can lead to serious family conflict. You probably don’t want that, which is why you should have a lawyer helping you make the necessary decisions and draft the required paperwork right now.
Business succession is very often legally complicated, but estate planning makes it easier. When you decide who gets what, you’ll also have to figure out which duties will be required of each beneficiary. You can make sure that a beneficiary without the necessary education or skills to run the business won’t be forced to take on too much responsibility. While the courts would transfer your wealth and assets to family, you can give everything to someone else if that’s your wish.
To make the transition smoother, you’ll want to have detailed documentation of finances and any accounts that may not be easily accessible. You can create digital records or keep updated copies in a safety deposit box–or both.
If you’re not the sole owner of the business, you still have rights. You decide what happens to your share in the event of your death. A buy-share agreement can help determine how much your part of the assets are worth.
You’ll need to name both an executor and someone who has power of attorney. The executor will execute your wishes, while whomever has power of attorney will decide what happens if you’re in no state to do it yourself. Remember: the idea is to make your own choices. They may be difficult, but they shouldn’t be left to probate courts or grieving family members.