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Estate planning is especially important for small business owners. Between management confusion and estate taxes, many small businesses do not survive the death of their owner. As an aging business owner, you need to put a plan in place, both to insure your business’ survival and to provide money for your family. If you fail to do this, you might leave those you love with heavy burdens should something happen. Here are highly effective estate planning strategies for business owners to protect their interests.
Create A Succession Plan
To protect your business from managerial chaos after your death, create a succession plan to be carried out in the case of your death or incapacitation. This plan should name your successor. This should be someone in the business or who is prepared to run the business at the same level you have. Next, the plan should outline how management of the business will shift after you. There are numerous project management apps that can assist you and your employees. In putting this plan together, you should be transparent with your employees and deal with any conflicts that might arise from your choices. This should ensure that your business can carry on without any problems without you, no matter how unexpected it may be.
Write A Buy-Sell Agreement
To ready your company for your absence, put together a buy-sell agreement. This sort if agreement allows you to designate a sale price for your shares of the business. It also lets you determine which people in the company can or cannot buy these shares. This ensures that only your designated successors can take financial control of the company. Make sure whomever will take over understands the importance of expense tracking. The agreement will also encourage open communication between you and your partners about what happens when one of you dies.
Minimize Taxes
You need to put plans in place to prevent aggressive taxes. After your death, your estate will have to hand over a vast percentage of your estates value in estate taxes. Since your company’s value is probably not in liquid funds, this will involve selling the whole business to cover part of its value. To avoid this, you can use the tax breaks called section 303 and section 6166. These are tax breaks for small businesses to prevent this outcome. If you work closely with an accountant to set up these tax mitigation strategies, it could be one of the best ways to maximize your money for your family and loved ones.
Establish A Trust
Another way to protect company assets from taxation is by putting them in a trust. Specifically, you should put it in a revocable living trust. This will allow you to move company assets in and out of the trust as you need them. According to workers compensation lawyer Todd D. Beauregard, “You should carefully understand the issues related to many different types of trusts for you to consider as part of your estate plan.” At the time of your death, this trust can be shifted immediately to a designated heir. This will ensure that your company’s assets are both protected from taxation and being put into escrow after your death. With a trust, needed company money and assets can be kept where the company can use them.
Life Insurance
With your business well looked after, a life insurance policy can provide fund to your family. A life insurance policy. Even if your company survives under an successor, the money you brought home to the family won’t carry on after your death. A life insurance policy will provide your loved ones a weekly payout to help cover their bills. It may allow them to enjoy debt free living. Many business owners miss the importance and benefits of life insurance. It could ensure the financial stability of your family in the case that they lose you and your income. You can also get insurance coverage to protect yourself form disability as well. Life insurance ensure your loved ones are financially ready for you passing.
Here are many ways to ready your estate for your passing. Create a succession plan to ready your business for transition. Write a buy-sell agreement to name a buyer for your shares so that you can control who takes possession of the company. Talk with your account to use tax breaks to protect you from the estate taxes. Next, consider forming a trust to protect business assets that will be passed on from your possession. Of course, you can buy life insurance to protect your family. These estate planning strategies will ensure that your company and family will not have to worry about money after your death.
