Why your business needs estate plan? Imagine this for a moment: 20 years ago you quit your corporate job and launched the business you always dreamed of starting. You started at ground zero, and it took almost 5 years just to get into the black – but you did it. After 20 years of operation, your built-from-scratch venture is now a million dollar small business.
But because of an unexpected accident, you’ve suffered an untimely demise. The government steps in and slaps an estate/death tax on your business that reduces it’s worth by 50%. Family members, co-owners, and people you barely had contact with come out of the woodwork to begin taking their piece of the pie, and within a year, the business you spent 20 years building is now back to zero.
It sounds like a nightmare, but this has been a reality for many. That’s why you need a good estate plan to protect your business and your family.
An Estate Plan is a plan put in place to ensure that your estate (anything and everything you own) is distributed according to your wishes upon your death – while also minimizing taxes and ensuring that your beneficiaries receive the maximum amount of your estate.
Most people think about a personal estate plan, but, as a business owner, it’s crucially important to have an Estate Plan that takes your business into account.
Here are 3 reasons your Estate Plan should include your business:
- Overall value – It’s likely that your business accounts for the largest amount of your net worth, ie. what you will be passing on to your family. It’s vitally important to leave clear instructions and even assets to the next generation.
- Succession – Even though you are the owner of your business, often you aren’t the only one that depends on it. Co-owners, family members, employees, and valued customers all depend on your business outliving you and carrying on well. An Estate Plan allows you to put together a plan of succession to ensure that your business falls into trusted hands when you are gone.
- Minimize Taxes – Working with a skilled attorney or financial planner, you can put an Estate Plan in place that allows you to transfer business assets to your beneficiaries while ensuring the appreciation of these assets isn’t subject to overwhelming taxes, securing the max value for your beneficiaries.