While you are probably familiar with the need to engage in individual estate planning, you might not stop to think about how an unexpected death or incapacitating event might affect your business. As a business owner, you tend to focus on immediate goals and issues, but you also must look at the future by preparing for unanticipated events. By engaging in careful estate planning, we can help you safeguard the assets you have worked to accumulate over the years for the next generation. A Florida estate planning lawyer at Kramer Green can evaluate your situation and determine the best forms of asset protection for you.
The type of estate planning you choose must consider how you intend the business to operate in the future – if at all. For instance, if you have partners, you may wish the business to continue operating under their ownership. If you have a child who has worked with you in the business, you may anticipate that he or she will continue running the business. On the other hand, if you are a sole proprietor and have no one to take over the business, the business may need to be sold or dissolved following your incapacitation or death.
If you have one or more business partners, you must think ahead about handling your respective business shares should one of you unexpectedly pass away. Failure to have this type of agreement in place can result in the deceased business partner’s surviving family members attempting to operate a business in which they may never have been involved or have no interest. This situation can lead to instant conflict that is easily avoidable.
The main purposes of a buy-sell agreement are to create a clear succession plan when one of the owners passes away and to restrict the transfer of ownership to third parties. The buy-sell agreement outlines how the surviving partners assume ownership of the company and pay the surviving family members of the deceased partner for their share of the company.
In many cases, the business maintains a life insurance policy expressly for this purpose so that the funds are readily available in this type of situation. The value of each share of the company is set by the buy-sell agreement, usually commensurate with the value of the life insurance policy that the business maintains; the owners should reevaluate these values periodically to determine if they need any adjustments.
Transferring Your Business to an Heir
If you intend to transfer your business to an heir upon your death, you may find it useful to take some steps toward that transfer during your lifetime. Doing so may ease the transition process, even if you want to continue being an active business owner. However, if you choose this option, you will need to create a detailed business succession plan so that your chosen heir has the knowledge necessary to operate the business effectively and successfully.
You also can outright leave the business to a beneficiary in your will. However, this may not be the best option if you are unsure that the beneficiary can manage the business or if the beneficiary is still a minor at your death.
Another option is to transfer your business interest into a trust. You could appoint a trustee, such as a key employee, to manage the business until the intended beneficiary of the trust gets up to speed and is ready to take over the business. The trustee also could continue to manage the business indefinitely for the benefit of the trust beneficiaries. Of course, a trust also avoids the probate process, keeps your business affairs private, and generally saves on time, court costs, and legal fees.
Dissolving or Selling Your Business
If you have no surviving heir or anyone else interested in taking over the business, a sale or dissolution may be appropriate after your death. In that case, you should create a detailed plan for winding down the business, culminating in a sale or a business closing. Again, keeping good records of the business assets and debts is essential so that your surviving family members can more easily handle the business’s sale or liquidation.
Allow Us to Assist You with Your Business Estate Planning Needs Today
An estate planning attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. can provide you with the assistance that you need to create a comprehensive plan to protect your business assets from unexpected events. We know how to provide you with the maximum protections available to safeguard the wealth that you have worked to accumulate over time for your family members. Call us today at (954) 966-2112 or contact us online to set up a time to discuss your legal issues with our experienced estate planning lawyers.