Carissa Giebel column: Business owners need estate planning
6:23 AM, Jul 31, 2012 |
It’s important for all business owners to have an estate plan in place. Whether you own a small business or a large corporation, an estate plan will ensure your wishes are accomplished at your death, and your loved ones will be saved from a messy and costly transition.
Business owners need to plan for contingencies. If a business owner becomes disabled and unable to work, whether temporarily or permanently, how would the business proceed? Who should be making the business decisions in place of the disabled owner? Depending on the type of business, how long of a disability would be required before the business would be sold or someone new hired to take on the role of the disabled owner?
What if the business owner dies? Does the business need to be sold? Can the business still operate? If so, who will make decisions? If there is more than one owner, how is the family of the deceased owner to be compensated for the interest in the business?
These are just a few of the questions that can be agreed upon in writing before an emergency does happen. This is where a well-thought-out operating agreement and a buy/sell agreement would come in. These documents help plan for contingencies, to ensure the business will continue to operate smoothly in case of an unexpected contingency.
Many business owners fail to plan for their business to avoid probate at their death. One of the simplest solutions for this is using a revocable living trust and funding the business to the trust. Then, at death, the business will not be part of the probate estate and not have to go through court. This will ensure the orderly transfer of your business, maximize any potential tax planning opportunities, and maximize the assets left for your loved ones. The trust can provide how you want your business interests distributed.
Often I help create a business for those who own rental real estate and want to protect themselves from potential liability or protect the real estate from potential nursing home costs. Establishing a revocable living trust can even come in handy for these business owners who may not plan on the business continuing after their death. With a trust in place, the real estate can be assigned to the trust. Then it will not have to be part of the probate estate, costing less at death and saving more assets for loved ones.
Business owners also need to make sure they have powers of attorney in place. They need to name someone to make their financial and business decisions for them if they are unable to and someone to make their health care decisions for them if they are incapacitated and unable to make their own decisions.
Estate planning is not something business owners should gloss over. Save your loved ones, and your business partners, a potential mess. Do the planning now.