If you are running a business, it’s easy to place estate planning on the backburner. We know that as a business owner, you’re very busy. But the reality is that your business could be at stake in the event of your incapacity or death should you not have the right plan in place.
You may think that estate planning and business planning are two separate tasks, but they are actually linked. Given that your business is likely your family’s most valuable asset, estate planning is crucial not only for your company’s continued success but also for your loved one’s future well-being.
To demonstrate, here are four issues your company and family are likely to encounter as a result of poor estate planning, along with the corresponding estate planning solutions you can use to prevent and/or mitigate those issues
If your estate plan consists of only a will, your estate, including your business and its assets, must go through probate when you die. When creating an estate plan most people think a will is sufficient but it’s far from the ideal option. During probate, the court oversees your will’s administration to ensure your assets are distributed according to your wishes, but probate can take months, or even years, to complete, and it can also be quite expensive.
If you become incapacitated by illness or injury and you haven’t legally named someone to manage your business assets, the court will choose someone for you. Another issue with relying solely on a will is that a will only goes into effect when you die and offers no protection for your business if you’re incapacitated by accident or illness. This is the issue with just a will in place. Like probate, the court process associated with guardianship can be long and costly.
If your business partner dies and you don’t have a legal agreement that allows you to purchase your partner’s share of ownership in your company, along with a source of liquidity to fund that purchase, you could find yourself in business with your partner’s heirs.
If you share ownership of your business with one or more other people, it’s crucial that you have a legally binding plan in place designating what would happen to each partner’s ownership interests should one of you leave the company, get divorced, die, or become incapacitated. Without such a plan in place, along with the funds needed to execute that plan, all sorts of potential problems and conflicts can arise.
If you name a family member to run your company after your death and you don’t provide them with a detailed plan, your business can be ruined by just a few poor decisions.
There are countless stories of family members assuming control of a business and ultimately end up running things into the ground. Even if your successor doesn’t destroy your company, he or she could potentially cause serious conflicts among your staff, clients, and family simply by managing the business differently than you.
Secure Your Business, Your Legacy, and Your Family’s Future
You see, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started with a Family Wealth Planning Session.