If you own a business then you have two types of estate planning to think about: personal and business. Ultimately, business estate planning answers the question, “What will happen to your business when you are gone, and how will that take place?”
Chances are that your business has several stakeholders other than yourself, who you may or may not trust to make sure that everything is carried out as you wish or expect.
At the same time, the death of a loved one is one of the most stressful and emotionally challenging things a person can go through in life. If you family has to deal with complications regarding your business, it will only add to the emotional upheaval they are going through.
The good news is that an effective business estate plan can greatly help with that. And it can help you rest assured that your family will not be dealing with conflicts over business matters when you are gone. Here are a few estate planning tips from a recent Forbes article that help take the emotional stress out of business succession:
Get a well-drafted buy-sell agreement in place. This is sort of like a will for the business. It allows the owner of the business to make sure that their wishes for the business’ future are met by establishing a business value, a distribution plan and details on how the sale should be executed. With the buy-sell agreement in place, you won’t have to worry about other people carrying out your wishes.
Consider an escrow or trust to make sure business interests are protected. These are effective methods at making sure that your business interests are transferred seamlessly to your heirs. This prevents your heirs such as your spouse or your children from having to fight with other shareholders for what is rightfully theirs.
Make sure that the succession plan is pre-funded. Typically, there needs to be funding in order for a buy-sell agreement to take place or the process can become hotly contested by surviving owners. If you use an estate planning product like life insurance to pre-fund the transition plan, then it is more likely to happen in a smooth and conflict-free manner.
If you are a business owner, you want to make sure that your business interests become an asset and not a liability for your family. Speak with an experienced estate planning lawyer soon about how to make sure that you have an effective business succession plan in place. At the same time, you can make sure that your personal estate plan is covered as well.