Many entrepreneurs in Kansas City have spent their lives growing their business and reaping the fruits of their hard efforts and successes. Naturally, their day-to-day priorities involve the running of their business. However, there is one aspect of being an entrepreneur that should not go overlooked: estate planning.
Through a well-rounded estate plan, a person can plan for what will happen to their business when they pass away. Of course, there are the traditional estate-planning documents, such as a will, trust and power of attorney. A will allows the business owner to designate how his or her assets should be handled down to his or her heirs. A revocable living trust allows the trust to have title over the property in the trust while still letting the business owner who created the trust to keep on managing the trust property while he or she is alive. Finally, a durable or general power of attorney can designate someone to take over the day-to-day affairs of the business should the business owner become physically and mentally unable to do so.
However, there are two other estate planning documents business owners should consider: buy-sell agreements and succession plans. If a business is a partnership or only has a few owners, a buy-sell agreement can provide a means for redistributing the owner’s share of the business when that owner becomes disabled or passes away. Moreover, the other partners to the business should have a term life insurance policy, in which the other partners are designated as beneficiaries. That way, should one of the owners die, the policy assets can then be used to pay for that owner’s share in the business.
Finally, there are succession plans. A succession plan addresses the transition of the business after the owner passes away. It will name new owners, and it will designate those who are to take on managerial duties after the owner passes away. It can even lay out rules for how new employees should be hired, instructions on how family members will be paid and promoted and it can contain provisions on dispute resolution.
As this shows, business owners who are considering estate planning need to think about more than a simple will. Especially if they have spent years as a business owners, they will want to see that their business survives after their death. With the right estate plan in place, this may be possible.
Source: business.com, “5 Estate Planning Tips for Entrepreneurs,” Fred Cohen, Nov. 8, 2016