Building a successful business is reasonably the dream of any business owner. Business owners go through many lengths to ensure that the longevity and viability of their businesses are ensured. It is not uncommon to see businesses invest in inventory, advertisement, and even insurance. However, just as you ensure that your business has everything it needs to thrive on a day-to-day basis, it is just as important to plan for the unfortunate event of your passing. Having a comprehensive estate plan does not only mean having a strong will or a keenly worded trust in place. Business succession planning should be at the forefront of your mind if you would like to ensure that your business continues to thrive after your death or that measures are taken so that your surviving loved ones may reap the benefits of your hard work in building up your business. This article will discuss different topics to discuss with your estate planning attorney if you would like to consider having a business succession plan in place.
Key Person Insurance
Running a business may have its ups and downs and, unfortunately, death can cause any company to fumble. Having a plan in place in case an important figure in any organization passes away is important for any business. That is where Key Person Insurance comes into play. Key Person Insurance is essentially a life insurance policy purchased on the life of an owner of your business. Such a technique in business succession planning is quite useful if you are concerned about the sale of your interest in the company in the event of your untimely passing. For instance, suppose you are in business with three of your best friends and you suddenly pass away. If the business owns a Key Person Insurance policy on your life, the business can cash in on the policy at your death and use the proceeds to buy out your interest in the business. The proceeds of the buyout could leave money in your estate for your loved ones when you pass away and can simultaneously allow your business to continue running without having to use its own funds to buy out your interest. Such a planning technique may take expert guidance, of course. If you are concerned about whether Key Person Insurance is right for your business, it may be a good idea to sit down with an estate planning or financial professional to see if such a route is right for you.
Operating Agreements
Generally speaking, through the use of operating agreements, you can set up your business so that upon your death your interest passes outside of probate. As it stands, even with a valid last will and testament in place, your estate will likely need to be probated after your death to ensure that your assets pass to your heirs. Of course, there are means by which your loved ones may avoid the time and expense involved with probating your estate, including through the use of trusts or even a properly worded operating agreement. An operating agreement is essentially an agreement amongst the owners of a business on how the business will be operated. In the State of Florida, business owners are not required to have an operating agreement for their businesses. Through proper planning, an operating agreement can outline what should happen with your business interest upon your passing without the need to run your business interest through the probate process.
Last Will and Testaments
Through the use of a last will and testament, you have the ability not only to dictate the passage of your real and personal property, such as your home, money, and cars, but you also have the ability to mandate what will happen with your business interests upon your death. Furthermore, you can dictate what should happen to your business interest upon your death in your will, such as the direction that your business interest to be sold, which could come in handy if you know that your survivors will not be interested, or qualified, in running your business after you have passed away. Please note, that having a last will and testament in place is not a means by which you may legally avoid probate in the State of Florida. However, generally, having a last will and testament in please at the time of your death ensures that your assets will go to whomever you choose. Your estate planning attorney can help guide you to the best route to ensure the proper passage of your business after your death.
Trust Planning
Trust planning is an effective tool to use in estate planning as it may accomplish many goals. For instance, through the use of a trust, you may transfer your assets to a trust to avoid your loved ones needing to put your estate through probate after your death. As trusts are separate entities, there is no need to probate assets held within a trust. Furthermore, through the use of a trust, you can see to it that your business continues to operate even after your death. For instance, if you were to transfer your ownership interest in your business to a trust, the business may be operated by the trustee of your trust. Thus, your family can avoid the need to probate your business interest after your death. However, please note that such a technique may require the skilled guidance of an estate planning attorney to ensure that the proper legalities are in place. For instance, there are certain provisions within the trust which are needed before a trust can be used to operate certain businesses.
Conclusion
Your business is likely an important part of your life. As you can see, there are options for ensuring that your business either continues on after your passing and that there are even options available to you should you wish to liquidate your company for your family’s benefit. In order to take advantage of whatever options you may have available to you; it would be important to sit down with an estate planning attorney to craft a comprehensive estate and business succession plan to suit your goals. Your estate planning should evolve as you do in life, and it only makes sense to get started with your plan as soon as possible. If you have any questions or need assistance setting up your estate plan, we encourage you to give Stivers Law a call at 305-456-3255.
Justin serves as a member of the American Academy of Estate Planning Attorneys (AAEPA), a national organization comprised of legal professionals concentrating on estate planning. As a member of the Academy, he receives ongoing, comprehensive training on modern estate planning techniques.
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