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If you own an interest in a business, your estate planning can become complex.
Without proper planning, a business can get stalled in the probate process,
creating potentially significant problems for your heirs. They may have to seek
a probate court’s approval for business decisions during the months the estate
is being probated.
Questions to ask:
- Who will operate the business after your death?
- Will your survivors have the necessary expertise
and the interest to continue running the business?
If your beneficiaries want to continue the business and
are able to run it, you can arrange for a relatively simple
transfer. If they are not interested in continuing the business,
you will need to arrange to either sell the business or have
someone else manage it.
Many business owners use buy-sell agreements to ensure a quick
sale for their heirs. A buy-sell agreement is an understanding
reached among owners of the same business to buy and sell their
respective interests in the corporation upon their death. Life
insurance is used to ensure that enough money will be available
for the buyer to “buy out” the seller (generally the surviving
spouse or family members). To ensure the continuation of a business,
many business owners purchase key person insurance. This type of
insurance helps protect a business from financial loss due to the
death of a key employee, such as the business owner or a long-time
employee whose talents are critical to the company’s success.
Once you determine whether or not to continue the business and
then who will manage it, you can consider how best to transfer the
ownership. Consider alternatives avoiding probate in order to insure
that the business continues uninterrupted. For help in estate planning
for small businesses, consult an estate planner with strong business
and tax experience.
Getting Help
If you need only a simple will or are considering a complicated trust,
seeking professional advice is essential. Trusts and alternatives for
business continuation especially require an experienced estate planner.
To find one, ask friends, your accountant or the trust officer at your
bank, or contact the local bar association. Look for someone with
established industry credentials — professional designations such as
Chartered Financial Consultant (ChFC®), CERTIFIED FINANCIAL PLANNER™ (CFP®),
Certified Life Underwriter (CLU®), a master’s degree in financial planning
or an attorney that is board-certified in trust and estate and/or tax law.
It is also important to feel comfortable and confident in your professional’s
abilities. You will be sharing with this individual details of your finances and
your plans for the future of your loved ones.
Certified Financial Planner Board of Standards, Inc. owns the certification
marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards
to individuals who successfully complete CFP Board’s initial and ongoing certification
requirements.
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Basic Money Management
Basic Money Management
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