Estate Planning 101: Estate Planning Considerations for Business Owners

Estate planning for business owners is important and oftentimes overlooked. Typically, business owners, eat, breathe, and sleep “business” and seldom consider protecting their legacy which may severely impact their loyal customers, and more importantly, family members. A business owner should have a comprehensive estate plan that includes business succession planning to provide them with peace of mind. Estate planning for business owners often includes many of the same issues and concerns for non-business owners with other considerations to protect one’s business as it undergoes an ownership transition to remain as a going concern. Below contains a few items that a business owner should consider to create a comprehensive estate plan to protect themselves and their business during critical events:

Wills

Having a properly drafted will is invaluable for estate planning purposes regardless of whether it is for a business owner or a non-business owner. For instance, this legal document can provide a business owner with the option for determining whom they would like to manage their business and assets upon their death among other things.

Power of Attorney

A power of attorney form is a legal document that is essential for business owners. It permits a designated person to make decisions and act on behalf of another person, in this case, a business owner. This arrangement can be extremely useful if a business owner is incapacitated or other less critical circumstances. In either event, this document provides a safeguard for a business owner to ensure that in their absence, their designee is able to make decisions and act on their behalf.

Trusts

Creating a trust is common in estate planning, however, it can be especially beneficial for business owners. A trust, unlike a will, avoids the probate process which oftentimes results in an efficient transition of assets for beneficiaries upon the death of an individual. Another benefit of a trust is that it can allow a business owner to keep business assets in their name while allowing a trustee to manage such assets on their behalf.

Life Insurance

Though life insurance is not part of estate planning documents it is worth noting the benefits of this tool. If a business has multiple business owners, it is common for each owner to have a life insurance policy naming the other business owners as beneficiaries. In the unlikely event of the passing of a business owner, other business owners will have funds to buy out the interests of the deceased business owner. Additionally, if a business is owned by one person and they desire for a family member or another person take it over upon their death, a life insurance policy can provide the successor with funds needed to run the business during a difficult transition period.

Succession Plan

While many business owners do not have a written succession plan, this document is one of the most critical for a comprehensive estate plan. A succession plan outlines the process for identifying, developing, or selecting a successor or successors upon the happening of either of the incapacity, retirement, or death of a business owner. Some important items to consider in a succession plan, include but are not limited to, developing and training a successor, delegating responsibility and authority, coordinating business ownership and management functions, and maximizing employee retention. Failure to have a comprehensive succession plan may lead to disagreements and litigation among stakeholders of a business which could damage or even ruin its reputation and brand.

Buy-Sell Agreement

If a business has multiple owners, having a buy-sell agreement provides a sound approach to ensure continuity of business in the event of either incapacity, retirement, or death of a business owner. This document provides terms and conditions for purchasing a business owner’s interest under certain events and instances to protect the estate of a deceased business owner.

At Waugh Grant, our attorneys are highly knowledgeable and experienced in business succession planning and estate planning and can create a comprehensive estate plan specifically tailored to meet your business and family needs.

If you have any questions or would like to schedule an appointment, please email us at info@waughgrant.com

Meet Our Team

Christian W. Waugh's Profile Image
Christian’s practice includes litigation, appeals, real estate, government and municipal law, and a full range of business law matters. He is Board Certified in Real Estate Law.
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Gerrard L. Grant's Profile Image
Gerrard’s practice includes corporate and business law, tax and tax controversies, wills, trust, and estates, and outside general counsel services. He is Board Certified in Tax Law.
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