Business owners require specialized estate plans to help ensure that your business continues with as little disruption as possible if you are temporarily or permanently unable to manage operations.
If you pass away, your estate plan needs to address how the business can be sold or maintained, and needs to build in the flexibility to allow the people you have placed in decision making roles to make decisions related to the business depending on the situation at that time.
The Key Decision – Who Gets the Keys?
One of the first items in developing a plan is to determine the key person or persons who could continue business operations if you were not able to do so. Death is not the only circumstance that a business owner should plan for. It is also important to plan for short-term events, such as an illness as well as to prepare for a long-term disability or death. The person that you put in charge might be a key employee or close friend who has inside knowledge of the business and its operations. Above all, it should be a person you trust to make difficult decisions about the business.
However, the person that you place in charge of the business does not have to be the same person you wish to benefit monetarily from the business. Most estate plans that we prepare for business owners place the business interests in a trust, with the income from the business being distributed to a spouse or a child, but the decisions about the business being made by a trustee who has specialized knowledge about the business and may have a role in running its day to day operations.
An estate plan for a business owner must contemplate the specific needs for your business and family situation and build in flexibility to allow for the right decisions to be made for you and your loved ones.