As a business owner, it is imperative to account for your business in an estate plan. Businesses can comprise a significant portion of an individual’s total assets, and owners must plan ahead to ensure that their wishes are carried out appropriately. 

 

Without a plan, state law will determine what happens to a business in the event that the majority shareowner dies or becomes incapacitated.  State law may or may not align with the owner’s personal wishes, so it is crucial to create a plan to establish what specifically will happen to the business upon the owner’s death or incompetence.  For instance, many states require that assets, including business interests, be divided between children and a spouse upon a business owner’s death.  This may be an issue for business owners who do not want to see their business divided amongst multiple successors or pass to family members.  Instead, by creating an effective estate plan, owners can avoid state law mandates and directly control the future of their businesses.  

 

Furthermore, an estate plan will help to ensure that business goals are met and that the business is well-protected.  Owners can determine how their businesses will be transferred and to whom, and also provide a framework for how the business will be organized and run in the future.  This provides a source of stability for a business owner’s loved ones and for the business itself during a time of marked stress and emotional turmoil.

 

At the most basic level, business estate plans may include a Last Will and Testament, a revocable trust and a power of attorney.  These documents serve to delegate assets and designate an individual to act on the business owner’s behalf, in the event that the owner cannot act for themselves.  Business estate plans may also include more sophisticated documents, such as a buy-sell agreement, an intentionally defective grantor trust (IDGT) or a grantor retained annuity trust (GRAT).

 

Estate planning for businesses is also indispensable for tax purposes.  Business owners need to plan carefully to ensure that their businesses can thrive without being subjected to large, unnecessary taxes.  Estate taxes, for instance, can largely impact the success and stability of a business, so it is important to have tax planning in place to avoid unnecessary costs and to ensure sufficient liquidity to cover taxes and expenses. 

 

At Lara Sass & Associates, PLLC, we have the knowledge and experience to create an estate plan perfectly suited to your business objectives.  Please contact us with questions or for further information.