As a business owner, partner, or shareholder, you have spent a considerable amount of time ensuring that your business is profitable and has ample potential for growth. However, have you given enough consideration to how the business will (or won’t) run without you in the event of your passing or incapacitation? There are many estate planning tools that will enable you to ensure business can resume as usual, and your assets will be distributed accordingly. Here are some examples of how you can incorporate your business obligations within your estate plan.
Buy Sell Agreements
While starting up a company with business partners, it’s important to include a buy-sell agreement. This is a contract that enables the business owners to sell their shares of the business and allow other shareholders to buy them. To avoid litigation, there are many clauses that should be included, like triggering events, valuation, and funding. For estate planning purposes, the specific events that can trigger the buyout should be outlined. For example, it would make sense that if one of the partners passes away unexpectedly or retires, the other partners should have the ability to buy their shares. However, if they’re merely incapacitated for a short or extended period of time, due to an illness, or accident recovery period, it might not be advisable to allow the buyout.
Non-Probate Assets
Non-probate assets are a type of business asset that is passed outside of probate or subject to the terms of a will. Some examples include but are not limited to retirement accounts, life insurance policies, Payable-on-Death (POD) accounts, and jointly owned property. These assets should have designated beneficiaries and stay up to date to reflect the owner’s wishes. The business should have the ability to buy out certain non-probate assets so that the business may continue to operate smoothly. An added bonus to the business buyout is that it can add tangible funds to your estate.
Establishing a Trust
Trusts are an amazing and versatile tool for anyone whether they own a business or not. You may be able to utilize a trust to protect your business assets through a revocable living trust or an irrevocable trust depending on your unique circumstances. Funding the trust with some of the business assets will allow the management and distribution of the remaining assets after your death. In the case of incapacitation, you may be able use a revocable trust where a trustee will carry out your business and fiduciary obligations as outlined within the trust.
Conclusion
It’s very important for business owners to consider their obligations during the estate planning process. Whether there are unforeseen circumstances such as a death or incapacitation, or even if you want to retire, there are many estate planning tools that can be implemented to suit your business’s unique needs. If you need assistance with estate planning for your personal or business assets, it’s best to consult a firm that has experience in both business law and estate planning. To set up a consultation, contact the firm of Albright & Lumpkin, PC at (713) 455-6661.
Albright & Lumpkin, PC
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