Running and owning a business is just like raising a child: Both are investments in the future and both require a lot of time, resources and effort to raise successfully. One can argue that you would treat your business like you’d treat a child; you’d want it to succeed even after you’ve passed on or retired.
Yet, when it comes to estate planning, many only think about their personal assets and the future of their children. On the assumption that the business is successful, I’d like to think that it is something you’d like to see continue on independent of the stage you are in life.
Many business owners think estate planning and getting their affairs in order happens at the later stages in life. Generally speaking, it does; that’s because it is at that life stage that people tend to start thinking of their mortality and worrying about what will happen next or what will happen when they’re gone. Very rarely do we get the younger generation of entrepreneurs with start-up businesses or companies just out the gate thinking about these things. Let’s face it: The day-to-day concerns and upkeep of a business is more than enough to worry about, much less one’s mortality at the earlier stages in your life.
I’ve been in the industry for over 25 years and have seen many clients wait, only for it to be too late. In my opinion, securing your business assets sooner than later would be a better executive choice.
Business continuity is the topmost concern that entrepreneurs have. This can be a touchy subject, both on the personal and professional front, and based on previous experience, it is better to have that matter handled while you are in charge rather than leaving its fate in the hands of others who are emotionally invested in you or in your work. A set living trust and will can put in place parameters that a trustee can carry out accordingly. That said, be sure to put who you personally trust on the same document.
Having those names and decisions in place will alleviate any recipients of the assets from arguing. You’d rather have them upset at you than at each other and give them a higher probability of working things out amicably amongst themselves at your passing.
Therefore, it would be wise to create a business succession plan that designates successor trustees to be in charge of managing the business in the event of your incapacity or death. While a power of attorney document will nominate a fiduciary agent to act on your behalf when you are incapacitated, it is also necessary to create a trust to provide for the seamless transition of your business upon your passing to your successor trustees. Not only does transferring your business to your trust avoid the inconvenience and costs of probate, but it also ensures that your business assets are passed on to your chosen beneficiaries. Furthermore, timely planning preserves your business assets since advanced tax planning strategies might be used to establish specific trusts to minimize the estate tax.
While estate planning might not be top of mind for young entrepreneurs and business owners, it is essential to plan for all of life’s contingencies. Stay ahead of the game and guarantee your peace of mind and theirs sooner than later.