Estate planning is a method used by a business owner to organize how to manage or sell an estate in case one dies or retires. It is important to have an estate plan to protect your hard-earned assets and make sure your venture remains operational. While your business is stable now, you cannot be sure what will happen in case you retire or die. Here are some crucial estate planning tips to keep your business running. Â
1) Â Â Â Business Ownership
Most small businesses operate independently. As the owner, you are the decision maker and the driver. If you are not around, the business will stop running. It is necessary to talk to your family about the activities involved and let them know their future roles. Alternatively, the business may have joint ownership whereby several owners are involved. In case you leave or die without an estate plan, all your assets will be repossessed by the partners. A continuity strategy will come in handy as it protects the interests of the partners and your family should anything unexpected happen. If you have not started your estate planning yet, you need to exhaustively read this estate planning guide for small business before it is too late.
2) Â Â Â Minimize Your Liabilities
These are the financial debts that may occur during business operations. They include loans, accounts payable, mortgages, and accrued expenses. When one leaves or passes on the debt still lives on and becomes the obligation of their business to cover it. This will affect the assets you planned to leave for your family.
3) Â Â Â Estate Taxes
Federal or state taxes on an estate can reduce its value before it is distributed to beneficiaries. A good reason to plan one’s estate is to reduce the amount the business will owe in taxes. Since most business assets are not liquid, paying estate taxes often requires selling the business. Do not lose it to the IRS in estate/death taxes. This tax ranges from 35% to 50% of the enterprises worth and has nine-month limitation. The IRS has some tax breaks available that can help minimize the amount of tax needed to be paid. It would help if you also put shares into a trust to reduce these taxes, therefore, protecting your heirs along with successors.
4) Â Â Â Insurance
It would help if you had a contact represented by a policy whereby you get financial protection in case of a loss. Things do not always flow as planned, and insurance is there to guard you in the event of unexpected scenarios. Life and disability insurance can finance the terms of a buyout agreement. Life insurance can also cover all or some of the taxes after your demise. This strategy gives the heirs tax-free proceeds to buy the deceased’s shares.
5) Â Â Â The Last Will
This is a legal document that helps you decide how the assets you left are transferred and also outlines who receives it in case of death. Few small business owners have wills, which is an essential factor in planning for your assets security. It also helps by giving information about the enterprise as well as access, for example, bank account passwords. A will can help approve your heirs and your successors or have neutral third party to administer the holdings.
