Most people have heard of Estate Plans, especially as it relates to their Will, or more specifically, the distribution of their individually owned property at their death. However, when it comes to Estate Plans and businesses, most business owners may not be aware of the importance of updating these plans with how to handle their new ventures.
To better educate business owners on what changes they need to make to their Estate Plan when starting a new business, we will cover here how they relate to new business opportunities and how an experienced Estate Planning lawyer can provide you the legal help you need to ensure all of these critical loose ends are taken care of.
Estate Plans and Business Ownership — How are They Related?
Typically, Estate Planning allows you to prepare for the future before your death. This planning often involves numerous legal documents such as beneficiary designations, Wills, and Trusts that describe what you want to happen with your assets when you pass away.
However, when it comes to your business, an Estate Plan can also allow you to figure out what you want to happen to your business after you are gone. Estate Planning for business owners often consists of a succession plan as well as a buy-sell agreement that describes what happens to a partner’s portion of the business after their death if you have business partners.
What Does A Succession Plan Need?
Succession planning is a strategy that businesses use for passing on their leadership roles or the ownership of a company after an individual retires or passes away. This is done to ensure that the business continues to run smoothly, no matter what circumstances arise.
As a result, this succession plan will detail who you want to run your business after you are gone, whether that is an employee, your partner, a family member, or an outsider you want to sell your business to. You may also want to include other people in this succession plan if the individual you named cannot step up to this role.
Failing to create a succession plan can result in a lot of hardship to your business, as many times issues can arise because of disagreements between the others in the company leading to work delays, loss of business, and sometimes even expensive litigation. Worse yet, when you do not name a successor, someone that has no business taking over your company may end up in charge and responsible for the success of everything you have worked your whole life to build.
Creating a Successful Succession Plan
If you are considering creating a succession plan, we recommend reaching out to one of our knowledgeable Estate Planning attorneys, as there are many necessary details that need to be considered in a succession plan to ensure the transfer of ownership and management of your business is done properly.
For instance, management of succession planning will often include:
- The delegation of authority and responsibilities to your successors
- The training and development of your successors
- Equitable compensation planning to ensure that the business can maximize retention of its key employees
In comparison, ownership transfer planning may include:
- The coordination between who will manage the business and who will actually own it
- Thinking about the best interest of the business owner’s family and the best interest of the business
- Transferring the business during an owner’s lifetime to reduce the risk of business losses and allowing the owner to have an opportunity to consult with their successors
As you can see, numerous details need to be hashed out in a succession plan. Fortunately, with an experienced Estate Planning attorney on your side, you will not have to tackle these complex issues on your own. We can walk you through each part of the succession plan that needs to be addressed and ensure you have everything you need included in the plan.
Business Updates and Changing Your Estate Plan
Although setting up an Estate Plan when starting a new business is critical for the company’s overall success, it is also important to realize that when changes occur in the business, your life, or the laws, it is time to revisit these Estate Plans and make sure they keep pace with everything that is going on around them.
Consequently, you should consult with a skilled Estate Planning attorney as soon as possible if any of the following occur:
- You take on a new business partner since your succession plan has been prepared
- You have gotten divorced, married, had children, or have been widowed
- The tax laws have changed
- The value of your organization or business has significantly increased since its founding
- Your plans for the future regarding what you want to happen to the business has changed
- Your current succession plan is at least five years old
When you work with McCollum Law on your Estate Plan changes, we can not only review all of these changes and come up with a comprehensive Estate Plan that will fit your needs, but we can also make sure your loved ones and your company will be prepared for whatever happens next.
Don’t Leave Your Business Unprepared – Update Your Estate Plan Today
Although it’s not everyone’s favorite topic to think about, Estate Planning can save not only business owners a lot of time and energy in the long run, but it can also make sure that families, beneficiaries, and other parties are prepared to handle running a business after the owner passes away.
If you aren’t confident that your business will be handled the way you want after your passing, contact our Estate Planning team today to schedule a consultation.