Estate Planning for Business Owners: A Comprehensive Guide
Estate planning ensures that the business continues to thrive, despite life’s unpredictable transitions, such as employee departures, financial challenges, or the passing away of a key stakeholder. Estate planning for business owners grants peace of mind to business owners, employees, and stakeholders to ensure that their hard work and investments are protected for the future.
If you’d like to learn more about estate planning for business owners or general estate planning, register for an upcoming free estate planning seminar to hear from professional estate planners and business lawyers on how to secure your financial legacy based on your situation. You can also call Craig Associates, PC, at (828) 258-2888 for an initial case evaluation.
- Why choose us?
- Glossary
Why choose us?
Don’t take our word for it, here’s what actual clients in your community have to say:
My experience was wonderful. Very professional, friendly and efficient from start to finish. I would highly recommend Craig & Associates for your legal needs. I use Craig & Associates for my business and for my Estate/Trust. I will also continue to use this company for any future legal matters here in Asheville, NC. Thanks again for another great experience.”
Brandon T. | Asheville, NC
Common, helpful-to-know terms used in estate planning for business owners.
Insurance: A tool used within estate planning for business owners to provide financial security and support for business continuity.
Retirement: Planning for the future income and needs of business owners as they retire, including how to structure their estate to meet retirement goals.
Transition: Refers to the orderly transfer of business ownership or management, often essential in estate planning for business owners to ensure continuity.
Interest: Pertains to ownership stakes or the monetary interest in investments that must be managed within estate planning for business owners.
Disability: Planning for a person who is incapacitated, ensuring that business interests and personal needs are managed if a business owner becomes disabled.
Small Business Owners: Refers to owners of smaller enterprises, whose estate planning may require specialized considerations regarding assets, succession, and taxes.
Succession Planning: The process of identifying and developing new leaders to replace the current ones; a succession plan is vital in estate planning for business owners.
Estate Administration Costs: Fees and costs associated with executing a will or trust.
Estate Planning Process: The systematic approach to planning how a person’s estate will be managed and distributed; estate plans crucial for business owners.
Income: The earnings from the business, investments, and other sources that must be considered in estate planning for business owners for taxation and distribution.
RIA (Registered Investment Advisers): Licensed professionals who advise on investing as part of estate planning for business owners, adhering to a fiduciary standard.
401(k): A retirement savings plan that business owners may utilize for themselves and their employees, impacting retirement and estate planning for business owners.
Conservator: A person appointed to manage the financial affairs of a business owner if incapacitated, playing a role in estate planning for business owners.
Stock: Shares in a company or business, considered as an asset and thus integral to estate planning for business owners.
S Corporation: A specific business entity type that has unique taxation and ownership rules, impacting the structure of estate planning for business owners.
Asset Protection: Strategies to shield assets from liabilities, lawsuits, and other risks, vital in estate planning for business owners to preserve the wealth of business owners.
The Value of Estate Planning for Business Owners
Having a comprehensive and legally sound estate plan for your business provides a number of benefits:
- Estate planning for business owners guarantees that the business can continue to operate effectively in the event of the owner’s passing and that the employees still have jobs.
- Estate planning for business owners helps to reduce or even bypass applicable estate taxes. High estate taxes can take a sizable chunk of the business’s worth and may force the surviving family members to sell the business or its assets to pay the tax bill.
- Estate planning for business owners allows them to dictate who inherits their business, such as a family member, a business partner, or a chosen successor.
- Estate planning for business owners establishes clear instructions or restrictions regarding how the business should be run after the owner is no longer there.
Without estate planning for business owners, disputes can arise among family members or business partners over who are to inherit the business, which can be costly and time-consuming and may lead to the downfall of the business.
Additionally, the business’s daily operations could be interrupted, leading to financial losses, decreased customer satisfaction, and lower employee morale without a specified successor capable of running the business.
Key Elements of Estate Planning for Business Owners
Estate planning is a critical process that every business owner should undertake, regardless of the size or nature of their business. It involves the management and disposal of an individual’s estate during their life, if they become incapacitated, and upon death. Estate planning for business owners uses several estate planning strategies to protect the value of the businesses for the benefit of their heirs.
Wills and Trusts
A will outlines how and to whom the business owner wants their assets distributed after their death. In absence of a will, the state will take over the distribution (known as the probate process) as per its intestacy laws, which will not likely not align with the owner’s wishes.
A trust serves a somewhat similar function but offers added benefits such as avoiding probate, maintaining privacy, and providing potential tax advantages. A business owner can choose to set up a revocable living trust to maintain control over their business while providing directions for its management should they become incapacitated or pass away. An irrevocable trust, on the other hand, allows the business owner to transfer ownership of the trust to reduce the overall value of their taxable estate.
Power of Attorney
Powers of attorney (POAs) appoint someone to make decisions on their behalf if they become mentally or physically incapacitated. There are two types of powers of attorney that can be crucial for a business owner: a durable power of attorney for financial affairs and a power of attorney for healthcare.
Healthcare Directives
Advance healthcare directives, or living wills, ensure that the business owner’s medical wishes are followed. These directives specify the kind of medical treatment and life-sustaining measures the owner wants or doesn’t want, such as resuscitation, feeding tubes, or life support.
Role of An Estate Planning Attorney in Estate Planning for Business Owners
An estate attorney makes estate planning for business owners less complex and ensures its legality through their in-depth understanding of both state and federal laws that could affect personal and business assets. They can draft legally effective documents, including living trusts, wills, powers of attorney for finances and health care, and finish directives that deal with end-of-life healthcare choices.
An estate attorney’s services also advise on legal strategies to minimize potential taxes and probate costs and ensure that the process adheres to state laws.
Craig Associates, PC not only provides estate planning services, but as experienced business law attorneys, they also have the knowledge to help you run your business according to all necessary laws and regulations, keep your business (and you) out of court, and make sure your family, employees, and business legacy are taken care of according to your wishes.
Estate Planning for Business Owners FAQs
What components make up a business owner’s estate?
Estate planning for business owners comprises all personal and business assets. Personal assets include the business owner’s valued assets, like homes, cars, stocks, and bank accounts. Business assets involve the company’s assets (real property, business equipment, cash reserves, inventories, and goodwill).
What’s a buy-sell agreement?
In estate planning for business owners, buy-sell agreements are a contract between business co-owners that dictates how an owner’s shares may be reassigned if an owner dies or exits the business to prevent unwanted parties from acquiring stake and ensure business continuity.
What role does a financial advisor play in estate planning for business owners?
A financial advisor is a type of financial professional with expertise in tax laws, asset valuation, and wealth management strategies to help mitigate tax aspects, assure fair asset distribution among heirs and beneficiaries, and provide advice on business succession or the sale.
Learn More About Estate Planning for Business Owners
You’ve worked hard to establish your business; let us help you protect its future for generations to come with a tailored estate plan. The professional estate planners and knowledgeable business law attorneys at Craig Associates, PC, have over 18 years of experience in successful estate planning for business owners and are here to help you when you’re ready. Call us at (828) 258-2888 for an initial case evaluation, contact us using the form below, or take advantage of our free estate planning seminar.
