Estate planning is important for everyone. There is a multitude of things that can be accomplished with a well-prepared estate plan. This could be making the end of life preparations and giving medical directions. It could also relate to the distribution of property among one’s heirs as well as the creation of trusts to cater for heirs who might not be old enough or capable of managing their finances by themselves.
As a business owner though, there is a greater imperative to have an estate plan in place. This is because, beyond the considerations of you and your heirs, the business itself is a major stakeholder that must be taken into consideration as you make your decisions. The employees of the business must also be taken into account since the failure of the business after you are no longer around to run it would mean a loss of livelihood for many people beyond you or your heirs.
In preparing an estate plan with business as a focus, there are certain benefits that you will get, as well as certain considerations that must be factored into the process of preparing the plan.
Business Continuity
For most business owners, having a business to which they have given a substantial part of their lives die simply because they are no longer around is not a pleasant thing to envision. Most people want businesses that will outlive them and continue to flourish in the hands of their heirs long after their passing. That way, the business can continue to grow and provide a source of income for the family, as well as cementing the place of the family as business magnates, for generations to come.
Estate planning helps you achieve this in several ways. The first is by helping you determine who will be in charge of the business in your absence. The importance of having someone competent run a business cannot be overstated, and you certainly know that, as a business owner yourself. With an estate plan, you will be able to give directives in your will regarding the ownership and management of the business, thus ensuring that even though all your heirs get a fair share, the responsibility for keeping the business afloat and successful is not left to chance or the whims of a probate court.
Beyond ensuring that the business continues to thrive, another consideration for many business owners is ensuring that it stays within the family. Again, there are several ways to do this, but the most common is to put a restriction on the transfer of shares outside the family. That way, even though all your heirs inherit shares and can derive financial stability from that, there will be restrictions on the ‘sale of the shares, to ensure your family stays together to build the business.
Provision For Beneficiaries
The business you started was probably with the goal of providing for yourself, your family, and any other dependents you might have. Hence, continuing that provision even in your absence is a crucial aspect of what an estate plan can help you achieve.
One aspect of this is by designating someone to be in charge of running the business if you happen to be incapacitated physically or mentally. Upon recovery, you can take charge of the business or your will can take effect upon your passing. This is usually done through a financial power of attorney which will allow the person you designate to run the company and also make whatever provisions that are necessary for members of your family or anyone else whom you specify. It is also possible to have a medical power of attorney to empower someone to make an end of life decisions on your behalf, such as giving approval to certain medical procedures or turning off life support.
The will is the most important document when it comes to providing for your dependents. A good “will,” drafted with the aid of competent and experienced estate planning attorneys will contain a comprehensive catalog of your properties, from the large ones like real estate, cars and stock in your business to things like electronic devices or family heirlooms which although not necessarily expensive, are of inestimable emotional value.
The will would also contain an exhaustive list of the people and organizations to which you intend to bequeath your possessions, as well as any conditions to want to attach to the gifts. For example, you can attach conditions to make sure your children graduate college before getting their inheritance. That would serve to provide for them and also equip them with the knowledge and skills they need to run the business properly.
Avoiding Disruptions
Inheritance disputes have been the bane of many families, causing strife and destroying familial relationships beyond repair in some cases. While this would be bad in any instance, it is especially debilitating for a business. This is because a business needs to be managed competently on a day to day basis and any period where attention is focused on conflict as opposed to making the right decisions to grow the company is a period that could potentially lead to financial ruin.
For example, a fractured board that is focused on politicking to determine who should become chairman or hold any other position is unlikely to be one that would be able to successfully guide the business through financially turbulent times. If left unchecked, such conflicts have been known to destroy the company completely, resulting in all parties getting pennies on the dollar, despite the grantor’s best intentions.
By putting an estate plan in place and giving directives regarding who should be in what position and other important instructions, you can stop such disputes in their tracks and ensure that everyone is focused on building the business.
Conclusion
As a business owner, having a comprehensive estate plan is not an option. It is a necessity if you want to ensure that your business does not die or descend into chaos as soon as you are no longer around you manage it. It will help you provide for your family and other dependents adequately, as well as ensuring the continued success of the business itself, to provide for the family, employees, and community in the long term.
About the Author: Roxane Kaye, has been practicing law since 2002. She is admitted to practice law in Michigan state courts and before the Federal Bankruptcy Court of Eastern Michigan, Southern Division, as well as the Federal District Court of the Eastern District of Michigan. Roxane covers cities such as Burton, MI, Flint, MI, Fenton, MI, Beecher, MI, Lapeer, MI, Waterford, MI, Auburn Hills, MI, Pontiac, MI, Howell, MI, Owosso, MI, Wixom, MI, Rochester, MI, Rochester Hills, MI, Novi, MI, and South Lyon, MI.
You may contact Roxane below:
Roxane M. Kaye
Kaye Law Office, PLLC
8161 S Saginaw St
Grand Blanc, MI 48439
