Many business owners know the importance of having a will. There are also other tools at an entrepreneur’s disposal to help ensure the legacy of a mature small business.
A considered plan could protect an estate from certain types of creditors, reduce taxation and promote the efficient distribution of assets. Moreover, it could provide peace of mind for those whose livelihoods depend on the continued success of a company.
Succession planning
A succession plan is an example of a highly specific business estate planning document. These plans usually contain specific guidance for the future of a company after the death of an owner:
- Who will take over — purchasers, family members or key employers
- How people should implement the plan
- What to do if important terms of the plan are impossible to carry out
- An estimate of when the plan might be necessary
Succession plans might also include financial and tax information. For example, a valuation of the company and tax planning strategies could be instructive.
Business trusts
Some larger estates may be subject to taxes at a rate that significantly diminishes assets. Trusts are sometimes a cost-effective solution in these cases.
Additionally, trusts typically provide additional control over the ownership and use of assets. For example, charitable trusts could earmark funds for charities that the IRS approves as tax-exempt.
Customized strategy
Business estate plans often address the needs of the exact situation; as such, there are no hard and fast rules for including or excluding planning tools. It is typically more instructive to take an overall view of goals, assets and potential legal issues pertaining to the estate in question.
