To ensure your company is passed to your family, or to whomever you choose, in exactly the way you desire after your death, you need to create a comprehensive business estate plan. I help small business owners create a plan that works with their personal estate plan to ensure the transition and outcome is as seamless as possible for families, employees, and partners. In our initial consultation, we will discuss exactly what business estate planning in Florida entails. We will cover the topics below, in addition to others.
1. Living Trusts
Although you might think a will would sufficiently protect your business assets, a living trust will keep your business out of court, whereas a will won’t. While a will coordinates the division of your assets following your death, a living trust is a separate legal entity that effectively owns your share of the business, though without any tax consequences or change of control until after your incapacity or death.
Unlike a will, assets put into a living trust are not subject to probate. Beyond avoiding the hassles of probate, this also means your business affairs will remain private. A living trust has several other advantages over wills: It transfers your assets immediately upon your death in the privacy of your attorney’s office; it lets you designate a successor to take control of the business; and it saves on estate taxes, court costs, and legal fees.
2. Life Insurance
Unless your business generates significant cash flow—and will continue to do so upon your death—that income might not be enough to financially provide for your family. To offer a safety net for your heirs, team, and customers, invest in life insurance to provide liquidity while your family handles your affairs.
3. Buy-Sell Agreements
If your business has multiple owners, you’ll likely need a buy-sell agreement. A buy-sell agreement ensures that upon certain conditions—like the death or disability of a partner—the remaining owners are able to purchase your shares of the business, or your shares will pass directly to your heirs. This will prevent your beneficiaries from getting stuck owning a business they don’t want and can’t sell, and it also protects your remaining partners from being forced to deal with new owners they didn’t count on.
4. Business Succession Plan
If you hope to pass control of your company to your family, you’ll need a business succession plan to make sure your heirs know how to successfully run the business you’ve created or sell the company without you.
If you want a specific family member (or team member) to run the business, you should designate that person in the business succession plan, and then explain exactly how and when the business will be transferred to him or her. If you want the business sold, you’ll want to start planning for that now.
While there is a lot of information to take in, don’t fret! I’ll guide you through the process, allowing you to rest easy, knowing your family, team, and customers will be properly taken care of.