Estate Plans for Small Business Owners

It is important for everyone to have an estate plan and particularly for small business owners. All too many don’t, and if they do, it isn’t current. As with other facets of your life and estate planning, business estate planning helps to make sure that your business is taken care of in the manner you wish should you become incapacitated or die. This is particularly important for family-owned businesses that you want to keep in the family. Small businesses typically represent a large portion of the owner’s assets, be sure to protect it.

Working with a lawyer and financial advisor, a small business owner should start with traditional estate planning, such as creating a will and include tax efficiency planning, planning for a disability, and succession planning. The portion of your business estate plan that is in a traditional estate plan includes a will, a power of attorney, and a healthcare directive.

Tax planning plays a large role in estate planning. Tax laws change frequently, and your estate plan needs to stay current with these changes. Depending on your circumstances, you may be able to minimize the tax burden through trusts or a family limited partnership. Through good planning your beneficiaries may be able to use money in retirement accounts for business without tax penalties.

Estate planning issues can be quite complex when it involves family-owned businesses. Different family members may want different levels of involvement with the business. Likewise, you may want the business assets to stay within the bloodline. Careful estate planning can accommodate these issues.

Buy-sell agreements are important parts of a business estate plan when the business has multiple owners. The agreement stipulates who can buy an owner’s share of the business and with what terms. A buy-sell agreement comes into play when an owner exits the business for any of a variety of reasons. Work with your advisors to draft an agreement that is appropriate for you and your business.

A small business owner’s estate plan should include life and disability insurance. A personal life insurance and disability policy will provide a source of income to your family when you die or become disabled. A business owner should usually purchase a key person life and disability policy with the company as the beneficiary.

Create a succession plan as part of your business estate plan. The succession plan delineates how you, your family, and your business will prepare for a transition in ownership. It is a comprehensive document for the purpose of keeping a viable business in operation or preparing it for sale.

It is important to discuss your estate plan with all involved parties throughout the planning process and once complete. Their input may help you draft a more appropriate and effective plan and minimize later conflict. Make sure your family knows where to find your estate plan.

Review your estate plan on a regular basis. Keep it updated to reflect any changes in your family status and in the law.

Creating a good and effective business estate plan is good for you, your family, and your business. It requires good experienced legal expertise in the areas of estate and succession planning. It is a more complex plan than a traditional estate plan. Work with Shoffner & Associates to develop one that best addresses your and your business’s circumstances.

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Freya Allen Shoffner, Esq.
Shoffner & Associates
Counselors to Small Business and Families.

Give Freya a call at (617) 369-0111 TEXT US (413) 207-6219 or email

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