Estate planning is important for anyone, and it can be particularly essential (and potentially more complicated) for business owners. The following explains the importance of estate planning for business owners, as well as some of the key factors that these individuals should consider when (and maybe incorporate in) estate planning.
Why Is an Estate Plan So Important for the Small Business Owner?
The main concern and monkey wrench really is: “What happens to your business, if you should become incapacitated?” Well, here’s a list of things that could really bring your business to a grinding halt, if you became incapacitated:
- There’s no one to sign the checks or perform payroll.
- Important supplies won’t get ordered.
- There’s no one to perform the day-to-day operations.
The only solution to these foreseen problems becomes naming a power of attorney or conservatorship for the business. The power of attorney can be set up in the estate plan, while a conservatorship will be more expensive and take much longer to get done as it will have to go through court hearings. So, it’s best to get the estate plan done, so you don’t burden your family with having to go through the courts to get control of something you work so hard to build up.
Naming a Successor to Run the Business
If you are a parent and a business owner, you might be challenged with naming a child as your successor to take over the company. Obviously, this option would be more likely if the children were older and in adulthood.
To make a child a successor, you’d have to make them the power of attorney in your estate plan. If you had more than one child, you might even consider reimbursing the other child financially for giving another child the reigns to the business. Or, you could always set it up so that each child had a certain percentage of controlling interest in the company. You could even make corporate control appointments with different levels of authority, such as CEO/President, CFO, Vice President, and so on.
If you don’t have children, you may designate a business partner as your successor. It will be very important to name beneficiaries of accounts, life insurance policies, retirement accounts, etc.
Itemized Estate Inventory
Be sure to qualify every valuable business asset and categorize them, including the following types of items:
- Real estate property
- Entities (corporations, small businesses, LLCs)
- Life insurance
- Investment accounts
Account Information
It’s also important to be as specific as possible because your family or business partner won’t be in a position to know how to access certain accounts. So, prepare a checklist or listing of the following items as well:
- Account and passwords (Social media, banks, credit cards, etc.).
- Contingency plans for transition from one owner to another.
- Location of important documents and safety deposit boxes.
- Safe combination.
Make copies of your estate plan and important documents, and give them to key family members and potential successors.
Contact the Santa Clarita Attorneys at the Law Offices of Darrell C. Harriman
For experienced help estate planning – regardless of whether your holdings include business assets (or other major assets), contact the trusted Santa Clarita attorneys at the Law Offices of Darrell C. Harriman. Our lawyers are here to help you navigate the complexity of estate planning while promoting your interests and protecting you, your family and your legacy.
Contact our estate planning team today by calling (818) 892-7093 or by filling out the contact form on this page.