If you have a business, it is a good idea to spend some time thinking about what you want to happen to your business upon your death or incapacity. What happens may be contingent on a number of factors. For example, if you have partners, will they take over? Will they buy out your share if you become incapacitated? Will a child or spouse take over your responsibilities in the business? These things should be addressed well ahead of any crisis.
Why a Will May Not be Enough
There are at least three prominent concerns regarding using a Last Will and Testament as a means of dictating what happens to your business. First, wills are only important if you die. What happens if you are incapacitated? With no clear plan in place, your wishes may not be carried out – or even known to your family or the government.
The second concern with using a Last Will and Testament to distribute your business is when executing the terms of the will, certain situations may prevent your plans from coming to fruition. For example, imagine you have a loan for your business. Imagine you die and the will goes into probate. The normal course of business in executing a will is to first pay all the debts, and then distribute the remaining assets. It is possible your business will need to be sold to pay debts, thus, leaving no business for your heirs to inherit.
Finally, probating a will can take up to a year to complete. Who will run your business in the meantime?
The Importance of Estate Planning including Succession Planning
There is nothing wrong with having a Last Will and Testament. In fact, in most instances, a will is an essential part of a good estate plan. It is not, however, the only part of a good estate plan. It may not even be the most important part of a good estate plan. If you own a business, a business succession plan is essential. This ensures the stability and continued success of your business.
Succession planning considers passing control to your family or naming an inside successor. In both instances, defining business control versus retaining family interest is essential. Other options might include selling the company to business partners.
The Importance of a Family Business Trust
A family business trust can help you avoid some of the problems that present themselves with just a will. It allows one to defer taxes on income, and avoid estate taxes. Setting the business up in a family business trust allows one to avoid probate, which saves time, money, and heartache.
Finally, a trust allows a family business owner to designate family members to take on certain roles within the company.
If You Have a Business, You Need a Business Plan for your Death or Incapacity
You probably have a business plan for the next five to ten years. This plan probably presumes you will continue on in your current role. However, if you die or become incapacitated, all your careful planning could be for naught, unless you also have a plan in place to deal with these possibilities.
You need the experience of a board certified estate attorney to assist you with your business succession plans. At Doane and Doane, we have the experience necessary to anticipate and plan for all eventualities. Whether you are one of several business partners, or the sole owner of a small business, failing to plan is a plan to fail. Contact us at 561- 656-0200 to discuss your family and business planning needs. We offer a no obligation complimentary consultation. We look forward to working with you to ensure the plans for your business succession are executed according to your wishes.