When it comes to estate planning, most people think about their tangible assets such as their house, car and personal effects. They might also think of their intangibles, such as savings accounts, retirement accounts and stocks. What some people fail to take into consideration when crafting their will is that business ownership qualifies as an asset and will be included in their estate when they pass away.
The first step is to decide what you want to have happen to your business after you’re gone. Resist the temptation to think solely in the long-term or to plan only for dying of old age. It’s an unfortunate fact of life that unforeseen accidents happen. If you were to pass away tomorrow, what would you want for your business?
Keeping it in the family
Like many people, you might want to pass the business on to your children or spouse. If that is your desire, there are a number of strategies you can use to make sure that that happens.
If you have a conversation about your goals with the attorney crafting your estate plan, they will be able to explain in great detail the various pros and cons of each strategy as they apply to your individual situation.
Sales and buy-outs
Some business owners don’t have any children, or their children don’t seem like they would be interested in continuing the business. If that is your case, then you might consider arranging a sale of the business upon your death. You can instruct your executor to sell your business and distribute the proceeds to your beneficiaries.
Before you write your business interest into your will, make sure to check our business’s formation documents. For example, if you co-own your business with one or more partners, your death might trigger a buy-out or dissolution. If necessary, you may need to modify your business structure to conform with your estate plan so as to avoid any unnecessary litigation between your business partners and your executor.
A huge part of the legacy you leave behind will be the business that you worked so hard to nurture and build up. With proper foresight, you can take control of what will happen to that business once you’re no longer around.