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2 key issues business owners must address in their estate plans

On Behalf of | Jan 16, 2023 | Estate Planning

Personal circumstances have a strong influence on someone’s estate planning needs. Frequently, people will have to choose what kinds of documents to include in their plans and how to organize the distribution of their property based on what assets they own and who they intend to inherit those possessions.

For many people, the focus of their estate planning will be real estate holdings or financial accounts. Sometimes life insurance will be the biggest single resource someone has, which can influence estate planning even if someone’s will doesn’t determine the beneficiaries of that coverage. Your resources will determine what steps you need to take, and most people can handle the process effectively with professional support.

If you are the owner of a successful business, the company will probably be the asset that has the largest impact on your estate planning needs. It will also mean that you need to think about the future of the business itself when drafting your documents. What are two considerations you will need to address as a business owner planning your estate?

How to transfer ownership

The way that you hold ownership and the person or people that you want to inherit the company will influence how you arrange for it to pass to the next generation. Some people choose to use a trust to hold the company, as doing so can help limit both estate tax risks and also challenges from beneficiaries unhappy with your decisions.

There are multiple other ways to potentially transfer business ownership in your estate plan, and deciding the best method to do so will be one of the most important steps. You may need to perform a business valuation and draft specialized documents for the business’s future transfer.

How to transfer leadership

You might choose different people to have an ownership stake in the company and to manage the business. You might even need to create a succession plan so that the people who own the company after you can hire in train the right replacement if you don’t name a specific candidate. Your age, the demands of your business and your family situation will all play a role in your decisions about the person replacing you at the company.

Careful estate planning is important for most adults, but it is especially important for those who own complicated assets like businesses.

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