Without a doubt, if you own a business you have thought of when and how you might transfer the interest in your business. When anyone addresses estate planning issues, they have to make some decisions. But business owners have special considerations when it comes to their estate plans. If you are in this situation, you are likely wondering:
- Is transferring my business through my estate plan possible, and if so,
- How can I transfer my business through my estate plan?
Read on to learn the answers to these important questions and more.
What Is the Purpose of an Estate Plan?
Estate planning may involve the creation of numerous documents including wills, trusts, power of attorneys, and more. An estate plan allows you to arrange for the transfer of your assets and property at death and even during your lifetime. The plan works to make sure that your desired beneficiaries receive exactly what you wish to leave them. An experienced estate planning law firm will help you decide how to properly implement your wishes while minimizing taxes and other costs.
Can I Transfer a Business Through an Estate Plan?
Yes, you can. Your business is likely one of your greatest assets. Your estate plan can provide provisions for transferring this important asset. A veteran lawyer can speak with you about your options for transferring, protecting, or selling your business as part of your estate plan. When you first meet with your estate planning lawyer, try and bring with you:
- The name, address, and other identifying information of your business;
- Insurance information regarding your business;
- The names of all owners, partners, investors, and others associated with the business; and
- Information regarding your goals for your assets and property upon your passing.
A law firm with an estate planning division can evaluate your information and requests. An experienced attorney knows which documents can and should be used to attain the specific goals you have in mind. They can advise you as to whether your desires can be most efficiently achieved using your will, and which can be better attained using a trust document or power of attorney. They know that most business owners at some point wonder, How can I transfer my business through my estate plan? They know your concerns, and are happy to help answer your questions.
Exactly How Can I Transfer My Business Through an Estate Plan?
An estate plan addresses the transfer of all of your assets both before and after your death. This is especially important when you own a business. Some business owners want to keep their interest in the business for as long as possible, others may want to release it immediately. Some may solely address what happens to the business upon their death. Here are some options regarding each of these goals.
Transfer the Business Upon Death
An estate plan can include transferring your business through a will. You can choose who you want to give your business to when you die and list them directly in your will. Then, your business will pass to that person after your death.
Create a Buy-Sell Agreement for Your Business
You can also create an agreement with the person you would like to be your successor in your business. In doing so, the designated successor must agree to the terms spelled out in the document. Such agreements typically require your successor to buy your business at a designated time.
Usually, with these agreements, the purchaser is not ready to buy the business on the day that you both sign the agreement. Likewise, the business owner is usually not ready to sell. Instead of the agreement taking effect immediately, the document specifies a triggering event. The event that activates the agreement is usually the date:
- You retire;
- Your estate planning lawyer or accountant deems most useful to you for tax purposes; or
- Of your death.
Estate plans that involve buy-sell agreements often also include a provision that the sale will take place immediately if you become incapacitated.
Hold the Business in a Living Trust
Another intermediate type of estate planning for a business transfer is via a living trust.
This is a legally and financially complex option involving:
- Creating a living trust;
- Placing the business in the trust;
- Having the current business owner named as the trustee;
- Naming a successor trustee;
- Making provisions concerning the operations of the business; and
- Clear orders of how ownership decisions get made if the owner becomes disabled or dies.
It is important to note that the estate planning lawyer can ensure that you, as the business owner, run the trust while you are alive.
Transfer the Business Now
There may be a financial benefit or tax benefit to selling your business now. Some business owners enjoy the fact that if they sell their business now, they guarantee that it goes to the person of their choice. A sale now can provide this peace of mind. Therefore the sale of your business before death can be part of your estate plan goals.
As you can see, there are many options regarding transferring a business via an estate plan. Reach out to an attorney with estate planning experience. They can assist you in finding the best answers to your question, How can I transfer my business through my estate plan?
Law Office of Andrew M. Lamkin, P.C: Elder Law – Estate Planning – Probate
At the Law Office of Andrew M. Lamkin, P.C., we take pride in helping our clients establish an estate plan that avoids unnecessary estate taxes, protects their assets, and carries out their wishes. When you are ready to address your estate plan, or if you have questions regarding estate planning, call our office at 516-605-0625. Without an estate plan, the laws and courts of New York State will dictate what happens to your estate and the care of your children. Don’t let this happen. Contact us today for a free consultation.