For business owners, estate planning may seem like another task to do on a long to-do list. Having a solid estate and succession plan in place may be crucial to your business’s long-term success. If you are incapable of making business decisions, or if you unexpectedly pass away without an estate plan, your heirs may scramble to keep your business afloat.
Here are three tips that may make the estate planning process less stressful.
Begin With the Basics
When making an estate or business succession plan, start with a workable outline. Do not be afraid to set out a plan that still needs some fine-tuning. Put your ideas in writing. Even simple notes are better than leaving your loved ones without guidance and scrambling while dealing with emotional turmoil.
Some factors to consider when drafting a will and basic estate plan include:
- Who would you like to run your business in your absence? Should this person be a full owner, part owner or simply a manager?
- What framework would you like your heirs or loved ones to use to resolve business-related disputes in your absence?
- Do you want to restrict business ownership to family members or allow others to invest?
Imagining the future of your business helps to make big-picture estate planning decisions.
Make Your Plans Tax-Efficient
An attorney may help you write a will and a business contingency plan but may not be the best professional to work on tax issues. A financial professional may work with you on the process of succession. The goal is to transfer your business with a strategy that manages the impact of state, federal, and local income taxes on the transaction.
Discuss Your Intentions with Those Affected
One of the biggest sources of friction in the business transition process may come from the hurt feelings of those involved. Interfamily disputes may come up from miscommunication or unmet expectations. If your child has counted on being tapped to run the business in your absence, only to see that you named someone else to this role, it can be tougher for your loved ones to rally together.
Even if you suspect that this discussion may lead to some conflict, it is important to communicate your intentions and plans with those affected by them. The time to work on these issues is before they are needed, not after it is already too late.