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What business owners need to consider in estate planning

On Behalf of | Jun 7, 2024 | Firm News

You’ve poured your effort and dedication into building your business. However, what happens to it when you’re no longer around? Most people equate estate planning with houses and inheritances, but it can be a crucial process for business owners, too. Estate planning ensures that your assets are managed and distributed according to your wishes after your passing.

Here are some things to consider putting into legal writing to safeguard the future of your business:

Revocable living trusts

A revocable living trust can be essential to avoid probate, which can be a lengthy and costly process. By transferring business assets into a trust, you retain control during your lifetime and pave the way for a smooth transition to your beneficiaries when you’re gone.

Succession planning

Establishing a clear succession plan is vital. It outlines who will take over the business, guaranteeing continuity. This plan should detail the roles and responsibilities of successors, providing a roadmap for a seamless transition and minimizing disruption in operations.

Buy-sell agreements

These agreements are essential for businesses with multiple owners. A buy-sell contract between partners dictates what happens to your share upon passing or incapacity. It protects the remaining owners’ interests and secures the business’s stability.

Power of attorney

Designating a financial power of attorney allows a trusted person to make financial decisions on your behalf when you cannot do so. With a durable power of attorney, your stakeholders may be able to access and manage your assets properly.

Estate taxes

While California does not have a state estate tax, federal estate taxes still apply. Business owners must be aware of the current federal estate tax exemption and plan accordingly to minimize tax liabilities for their heirs.

Keep in mind that estate plans should be reviewed and updated regularly to reflect changes in the business, family circumstances and relevant laws. This maintains that the plan is effective and aligned with the owner’s wishes.

A clear plan ensures your business survives. Consider consulting with a legal professional. They can help secure your business’s future and keep your estate plan’s compliance in check.