Certain individuals have a greater need to engage in estate planning than others. Family circumstances are often the main incentives people have for creating an estate plan. Other times, their financial circumstances make estate planning a necessary undertaking.
Business owners especially need to establish a thorough estate plan. Individuals who own a business usually have complex personal assets and additional issues they need to consider and integrate into their estate plan as they move forward.
What are some of the most important estate planning considerations for those establishing an estate plan as a small business owner?
Paving the way for new leadership
One of the most important considerations when creating an estate plan for a business is ensuring the continued success of the organization after they leave their position at the company. Succession planning helps ensure that the right person steps into a vacant leadership role at the organization. A succession plan might include instructions on how to select and train a replacement or might provide a short list of viable candidates and guidance for them as they move into their new position.
Arranging for the transfer of ownership
The person assuming a leadership role at the company is not necessarily the person who inherits business ownership. Business owners may leave ownership of the company to one person, or they may want multiple beneficiaries to share an interest. In fact, business owners can choose not to leave their interests to any one individual and create a business trust instead. Business owners can create a business trust as a way of preventing their beneficiaries or heirs from selling the business to someone else, or closing it down and liquidating company assets.
Minimizing tax issues
There are many types of taxes that could arise during estate administration when the deceased individual owned a business. There could be estate taxes due if the company is worth millions of dollars. There could also be capital gains taxes if the beneficiaries do not want to own or operate the business and the company has to be sold. Planning to reduce the taxes imposed on the estate and its beneficiaries is important.
Creating or updating an estate plan to help ensure the continued success of a business is a smart move for those who have invested in an organization. A thorough estate plan helps protect not just the person who owns the company but their employees and the organization itself.
