After working hard to make your business a success, it’s important to make sure the business can continue successfully if something were to happen to you unexpectedly. That’s why it’s crucial to include details about your business assets in your overall estate planning. This process can be used to specify how your business assets will be distributed, who will take over leadership of the business, and most importantly, how your business will support your loved ones when you’re gone.
Follow these five steps to help protect your estate and your business when you’re no longer there:
- Write Your Will
Make sure your last will and testament includes instructions for the distribution of your business assets. Name someone you trust to be the executor of your will, responsible for carrying out your wishes for the transfer of your business assets. Also, determine who will receive your important documents and business information, such as log-in credentials for online accounts. Compile this information separately from your will so it’s not filed publicly in probate court.
- Choose a Power of Attorney
Designate someone you trust to serve as your power of attorney in the event you become incapacitated due to an accident or illness. In such an event, your power of attorney will be responsible for carrying out your business responsibilities, such as managing your finances, paying creditors, and handling payroll for your staff.
- Form a Living Revocable Trust
A will is a public document that is probated in court. Distributing your business assets through probate court can be a slow and costly process. A living revocable trust is a more efficient and discreet alternative that helps your estate avoid probate and allows a smoother ownership transition for your business. This option lets you manage and update the assets within the trust for as long as you’re the trustee.
- Have a Buy-Sell Agreement
If your business has a small number of owners, it’s important to have a buy-sell agreement in place to determine how your ownership interest will be distributed if you die. This is also important in case you declare bankruptcy or go through a divorce. It’s common for business partners to purchase a life insurance policy for each owner, with the other owners listed as beneficiaries. Funds collected from the life insurance policy are used to purchase the ownership interest of the deceased owner.
- Create a Succession Plan
One of the best ways to support your business’s long-term success is to create a business succession plan to help ensure a seamless transition of leadership. Your plan should specify who will take ownership – whether a partner, employee, or outside buyer – and establish a timeline for this transition. As you plan for your exit, consult an accountant, attorney, and financial advisor for help determining the value of your business and navigating tax laws.
Estate Tax Planning for Business Owners
At Sun National Bank, our estate tax planning team can help you develop a strategy designed to reduce potential tax consequences, preserve your wealth, and protect your legacy. Learn more about our many estate tax planning services today.