At LegalShield, we enjoy strong working relationships with our provider law firms. Fiffik Law is one of the amazing law firms that offers their services to make legal help affordable and accessible for our LegalShield Members. They have granted us their permission to republish their post, “Estate Planning Considerations for Small Business Owners.” Who better to hear this important information from than one of our very own experienced provider law firms?
As part of our “Make-A-Will Month” project, we want our members to take in as much valuable information as possible about the importance of estate planning. Creating a Will is just one piece of that puzzle. Fiffik Law has laid out the estate planning things to think about as you begin preparing for the future of your property, loved ones, finances and more.
Let’s hear from Fiffik Law
As a business owner, your major asset and greatest source of income is probably your business. In many cases, your concern is to pass that productive asset to younger generations and provide a livelihood for family members. As with many things in life, those are goals that are easier said than done. Succession planning for most small business owners is one of the most complex topics they’ll ever take on.
None of us is fond of thinking about our demise. We likely put off difficult tasks and succession planning certainly falls into that category for most small business owners. Make no mistake: if you want your business to survive and thrive after you’re gone, there’s no avoiding deliberate planning of tax and non-tax considerations of passing your business on.
Here are some of the things you should think about:
1. No estate plan = government decides
When you waive your right to protect your family and plan for your business, you’re allowing the government to make decisions for you. The government’s plan is called the law of intestate succession. That law, depending on the state you live in, would dictate to whom your business goes. Generally, states provide that assets go half to your children and half to your spouse.
A lot of business owners may not want their business split between two beneficiaries—like half to the spouse, half to the children. That would be particularly difficult if you children are minors, have addiction problems or credit issues. Your Will or Trust, depending on the estate plan that’s right for you, would dictate where your business goes and how its managed after you’re gone.
2. Who should be in charge?
One thing to think about is who oversees your business if you pass away. Your spouse may not be the best person, but it may be that there’s a key employee or another friend or executive at the company that could help run the business if you aren’t around.
Leaving the wrong person in charge could devalue your business. If your spouse is the only executor or trustee, then they would be in charge of running or selling your business and then retaining the assets in the estate for the beneficiaries. But you may want to have two trustees: perhaps your spouse for your personal assets—like your cash or your home—and then someone else for your business. Much depends on your family situation and how involved your spouse is in your business and whether they are a good choice.
3. Fairness with multiple children
Parents want to be fair when it comes to passing on their wealth. However, each of your children likely has different connections to your business. Some may be involved and others not at all. Some may put the hard work in and others not so much.
Your children will feel entitled to an equal share and sibling rivalry may play out in a way that can be detrimental to the business. Identifying and discussing these issues proactively can help to find resolutions to maintaining harmony among your children while also achieving the fairness that you desire.
4. Sudden health crisis
The success or failure of a small business is inherently tied to the central figure who starts, organizes, and manages it: You! What happens when you go to the hospital for serious surgery? Have a prolonged health crisis? You could be out of action for some time. That could put your business at a serious disadvantage resulting from the uncertainty that arises when the owner is unavailable, and no contingency plan is in place. Customers get nervous, employees get antsy, sales go down.
Estate planning isn’t just about what happens after you die. It’s very much about planning for contingencies when you’re still on the “right side of the dirt.”
5. Business partners
The death of one of multiple owners of a business often results in complex issues. Your partner likely does not want to be in business with your spouse or children. Will your partner be fair to your family or use their inside information to take advantage or even steal the business from your family? Even if your partners and family are willing to co-exist in a business, how are decisions made?
More owners often leads to conflict and inability to make decisions crucial for the business to continue and succeed. When you have one or more business partners, the estate planning discussion should include them as well. You want the business to succeed while at the same time ensuring that your family gets fair value of out the asset you worked hard to build.
6. Reduce death taxes
You’ve put your heart and soul into building your business over many years. The taxes payable on the value of your business after you pass away can be a huge bill for your family to pay. The concern is that your business may not have enough cash on hand to pay the bill, forcing the business to borrow money or even worse—to sell the business to pay the bill. With proper estate and business planning, you can reduce or even eliminate death tax on the value of your business.
What can LegalShield do to help?
At LegalShield, we have provider law firms like Fiffik Law to provide the affordable access to legal help that every human deserves. You don’t have to figure out your estate plan by yourself. By becoming a LegalShield Member, you can receive assistance with important issues like creating your Will, Powers of Attorney, establishing Living Trusts and Advance Directives, and taking care of other crucial estate planning matters.
Our LegalShield mobile app lets you access your membership info, contact a lawyer and more. You can fill out our Will Questionnaire for a simple introduction to creating your Will; then, we put you in touch with a provider law firm to begin the process. We offer the legal assistance and support that you need as you create the estate plan that best suits your wishes.
Take the next step!
- Get details about legal protection for your small business
- Find the right legal plan for you and your family
- See how we protect you from the fine print
Pre-Paid Legal Services, Inc. (“PPLSI”) provides access to legal services offered by a network of provider law firms to PPLSI members through membership-based participation. Neither PPLSI nor its officers, employees or sales associates directly or indirectly provide legal services, representation, or advice. The information made available in this blog is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide a recommendation as to a specific matter. The blog post is not a substitute for competent legal counsel from a licensed professional lawyer in the state or province where your legal issues exist, and you should seek legal counsel for your specific legal matter. Information contained in the blog may be provided by third party author. All information by authors is accepted in good faith, however, PPLSI makes no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of such information.
