Business owners frequently have more daily obligations and personal responsibilities than other members of their communities. They are beholden not just to their immediate family members but also to investors and employees.
Those responsibilities won’t simply influence their daily decision-making and lifestyle. They also have more to consider when creating an estate plan. They have more obligations in general and more people who depend on them to make wise choices.
Given how many people depend on them, there are many business owners who will feel a profound sense of peace of mind when they finally create an estate plan that factors in their professional obligations. How does estate planning protect those who own and run a business?
They ensure a smooth transition
Including succession plans for the business, such as documents detailing who will assume ownership and who will assume management responsibilities, is crucial.
Some people will find that they do not know any one person capable of fulfilling all of the rules they did for the company and will instead split their job into multiple smaller positions for others. Some business owners have one specific person that they intend to assume operational control and ownership.
Their succession planning helps ensure that the individual who will assume control over the company will receive the necessary training properly perform the job.
They prevent complications for loved ones
A business is a big asset, and it could potentially push your estate over the threshold for estate taxes. Your loved ones could lose as much as 40% of the property that you intended for them to inherit just to federal estate taxes. Estate planning might involve moving ownership of a business that you hold as a sole proprietorship or LLC to a trust so that it won’t put your stay at risk of major tax obligations.
A thorough estate plan addressing your business and how you hope to ensure the continuity of operations or its closure can also guide your loved ones with making what will inevitably be difficult choices after your passing. Drafting the right estate documents can help business owners protect themselves as they grow older and ensure what legacy they leave behind when they die.