When many people think of “estate planning,” they automatically picture legal documents and procedures associated directly with a person's death. While it is true that wills and trusts play a (potentially) huge role in estate planning depending on the circumstances, there are also instances where estate planning can affect the planner's life while he or she is still alive. An example of this is an advance directive or advance healthcare directive: having a living will can produce a blueprint of your wishes if you are medically incapacitated, allowing your chosen agent to make decisions on your behalf accordingly.
However, were you aware that an estate plan or a lack-there-of could have direct implications on your business? If you are a business owner, getting started on your estate planning is vital, not only for what happens after you die, but also for what happens to your business in certain circumstances.
How does estate planning affect my business?
You are likely already aware that business ownership definitely needs to be considered when writing a will or creating a trust. The first step when estate planning is to create a comprehensive list of your assets, and business ownership counts among assets the same way that your property and checking and savings accounts do. However, in addition to this valuation of your business assets, it is paramount to have a clear path should you (expectedly or not) die.
What options do I have?
There are many ways to handle death and business. Just like estate planning itself, what approach is best for your situation may be unique. The first thing is to understand how much your business (or your stake in it, if there are multiple partners) is worth. For example, a common exit strategy is a buy-sell agreement. This document outlines a clear path for who can buy into the business and what this process will look like.
You should draft a buy-sell agreement as early as possible: doing so will allow you to go through the process without an undo amount of emotion or stress. The longer that you want to draft the agreement, the more likely it is for outside players to develop competing interests, which will make coming to an agreement difficult if you have other partners involved with the business or family members who may be trying to jockey for position. Not only will a buy-sell agreement help you in the event of somebody's death, but also in the event that somebody wants to bring a new partner into the business or if a partner files for bankruptcy.
How will this build my business?
Talking about estate planning and your business will open the door to general business and financial wellness. Having the difficult conversations about what will happen to your business when you die will give you a great deal of valuable guidance and vision regarding your overall financial affairs. It will help you grow your wealth as an individual, and help your business grow as well.
Talking with a trusted professional is the first step. Contact us today at AmeriEstate to talk about the finer points of business formation, estate planning and beyond.