Estate Planning for Business Owners

Estate planning can take on a new level when you are a business owner. Besides a plan for managing personal assets, you also need to think about what will happen to your business in the future. Estate planning for business owners starts with knowing what your plan should comprise of and thinking ahead about potential difficulties or issues that may come up. Whether you operate your business on your own, have one or more colleagues or run a family business, it’s not a moment too soon to think about your estate planning requirements. Business owners need to consider working with a financial advisor that can help them safeguard their individual and business interests and make sure their finances are taken care of.

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Start With Estate Planning Documents

Parts of your estate planning for business owners means making stipulations for your personal and business assets. And when you run your business on your own, then your business assets are basically identical to your personal assets. You do not want to leave what takes place with those assets up to chance.

The Kind of Documentation to Consider for Your Business Estate Plan Comprises of:

Last will and testament: A will allow you to specify who you want to pass your assets on to when you meet your demise. Not having a will, your assets are deemed intestate, and your assets get distributed according to the inheritance statutes of your state.
Living trust: A revocable living trust is going to allow you to name a trustee to oversee personal and business assets on behalf of your beneficiaries should you become debilitated or meet your demise.
Financial power of attorney: A FPOA gives someone of your selection the authority for making financial decisions on your behalf should you be unable to do so.
Medical power of attorney: Also called a health care POA, this estate planning document allows you to name somebody to make medical decisions on your behalf should you be debilitated.
Advance healthcare directive (living will): This document allows you to declare what type of medical treatment you want or don’t want to receive in end-of-life cases.

Transferring Business Ownership Through Estate Planning

A lot of individuals can handle most of their estate planning using a last will and testament, however, business owners that require a succession plan are going to need more than a simple will. Business owners are required to tackle how their business interest(s) are going to be divided and/or transferred, and should the succession plan not be laid out in comprehensive detail, it could be subject to years of court proceedings over ownership by those interested.

Estate Taxes or Gift Taxes can also be an enormous hassle for business succession, so a good estate plan needs to include steps to minimize and bypass taxes to the fullest extent.

Interim Management

Even with thorough planning, there is going to most likely be a short period of time between your passing and when your heir(s) receives ownership of your company legally. Whether that period is a couple of days, a couple of weeks, or a few months, leaving clear guidelines for your company is going to make everything a whole lot easier.

If there is going to be an interim director that oversees the company throughout the transition, you are going to need to clearly outline their responsibilities and the degree of their authority. To avoid fear from directors, board members, lenders, key employees, and shareholders, leave a thorough succession plan that clearly guarantees the future of the company. Failing to quell the legitimate worries of those parties can lead to a dispersion that impairs your company for years and leaves behind disorder for your heir.

Why Is a Succession Plan So Vital?

Life happens—and unless you have a plan for dealing with the unforeseen, the business you worked so hard to build might crumble should you become debilitated, pass away, get a divorce, or choose to split with your business partner.

Think of your succession plan as peace of mind for the business you have worked so hard to build.

A Good Succession Plan Can Help:

Transfer ownership at the right time
Maintain your lifestyle when you retire
Provide financially for your heirs
Prepare the business to manage unforeseen events

Minimizing Taxes Through Strategic Planning

Examine the Company’s Legal Formation
Request All Legitimate Tax Deductions
Use of Available COVID-19 Relief Advantages
Delay Income – or Accelerate It
Decrease Your Adjusted Gross Income
Adjust Retirement Savings Accounts
Have a Plan to Repay Employees for Costs
Load Your Tax Return with a WOTC
Wait until Later in the Year to Acquire More Assets
Speak with a Tax Professional

The Bottom Line

Estate planning holds considerable significance in financial planning for individuals, but it holds even increased importance for those that own businesses.

Business owners need to think about key considerations like business succession planning, tax planning tactics, establishing key assets and beneficiaries, decreasing probate and estate management expenses, and safeguarding intellectual property and business interests.

The steps needed in estate planning for business owners include evaluating estate planning requirements and goals, identifying and appraising assets, selecting an estate planning attorney and other professionals, devising, and carrying out an estate plan, and updating the estate plan as required.

Arizona Family Law

Naming guardians in your will can be part of your estate plan. You may think you’re too young or don’t have enough money to justify the expense, but if you have children, you have priceless assets. There are many considerations when naming guardians for your kids. However, the process doesn’t have to be expensive or complicated.

There’s nothing better than the peace of mind you will have knowing you’ve protected your family at a time when they need it most. Let us help. Schedule a consultation or contact Ogborne Law, PLC of Arizona today.