When people think of estate planning, they often think of things like homes, cars, and bank accounts. In reality, estate planning goes beyond just personal assets.
At Robbins Estate Law, we understand that there are many important estate planning considerations for business owners.
In this article, we will go over some of the key steps in estate planning for business owners, so you can start thinking about your estate planning today.
Step 1: Get a Will
The first and most important step in any estate plan is to draft a will. A will allows you to designate the beneficiaries of your estate and how the estate will be distributed. If you pass away without a will, your estate could be tied up for years as the court attempts to determine who your heirs are and how your estate will be divided.
In addition to a will, you should also consider medical and general powers of attorney. These forms allow you to designate someone close to you to handle your medical, financial, and legal affairs in the event you become incapacitated.
A living trust may also be a useful estate planning tool for a business owner. A trust allows you to transfer assets while you are still alive, unlike a will. Using a trust can save time by keeping your assets out of probate.
Step 2: Plan for Family Business Issues
Estate planning for a family business can get messy if not handled properly. If you do not determine who will take over the business after you pass, the family business could fail due to infighting and inaction. A succession plan determines how the business and assets will be passed on to the next generation. This is the time to talk to your spouse, children, and grandchildren to find out who wants to stay in the business. You can do your heirs a big favor by creating a succession plan now and avoiding fights down the road.
Step 3: Address Tax Uncertainty
One of the most hotly debated issues in politics is the Federal estate tax. Any given election can dramatically alter the estate tax landscape. It is for this reason that you should stay on top of the tax situation as much as possible. By working with your attorney and financial advisors, you can attempt to mitigate these potential tax consequences.
Step 4: Create a Buy-Sell Agreement
Estate planning for small business owners can present unique challenges. A buy-sell agreement (BSA) can streamline the transition of ownership after you pass away and allow your fellow owners to keep things running smoothly. A BSA allows you to transfer your ownership interest in a business after certain triggers. You can use the BSA to set the terms and conditions of any transfer in ownership. A BSA can also be used to set the valuation method for transferring ownership.
Step 5: Evaluate Your Insurance Needs
You may want to consider your insurance needs in addition to the estate planning options discussed above. Life insurance is one way you can leave money to your heirs outside of probate. You can also use a life insurance policy as a tool for business succession planning. A policy payout can be used for a BSA buyout or to pay off the debts and liabilities of your estate.
Step 6: Stay on Top of Your Plan
Don’t just “set and forget” your estate plan. Life changes, and your estate plan will need to change with it. Family members may decide they don’t want to be involved in the business, laws and regulations may change, and business partners might leave. To stay on top of these changes, you should consider reevaluating your estate planning materials annually and making changes as necessary.
Talk to a Business Estate Planning Attorney
Why should your business fall apart when you’re gone? The steps needed to protect your business may seem intimidating, but they don’t have to be. A business estate planning attorney can help you transfer your business to the next generation.
At Robbins Estate Law, our attorneys understand the estate planning considerations for business owners. Instead of offering some cookie-cutter solution, we will work with you to craft a plan that fits your needs. Contact us today at 512-643-9341 to talk to one of our skilled Austin estate planning attorneys.