The business that you own may represent the vast majority of your personal wealth. It could also be evidence of a lifetime of career development and personal sacrifice. You naturally have specific intentions regarding your business.
Maybe you want your loved ones to sell it and live comfortably from the proceeds. Perhaps you would like to see someone that you love take over the company. As a business owner, you will likely need to factor in the three elements below when making major estate planning decisions to turn those hopes into your final legacy.
What the business is worth now and could be worth in the future
The value of your business has a major impact on the best way to transfer ownership and what a change in ownership could mean for the beneficiaries of your estate.
If the company is worth millions of dollars, there could be estate tax implications. Selling the business could also trigger income or capital gains taxes. You need to understand what the company is worth and could grow to be worth during your life so that your plans appropriately protect the company and your loved ones.
The right candidate to assume your role
While you may dream of leaving your business to your child, they may not have the right personality or skill to properly manage the business. You may need to consider transferring ownership interests or financial value to some people while assigning responsibility for the company to others.
A succession plan can be an important tool for those who expect the company they own to continue operating after they die. Providing guidance for choosing or training a successor can increase the company’s chances of thriving after you’re gone.
Your relationship with your family members
If your children resent how much time you committed to the business, they might intentionally undermine your wishes by closing or selling the company after your death. On the other hand, you may worry that one of your children will be susceptible to pressure from the others regarding how they run the company.
You may need to factor in your family relationships when you make decisions about management and ownership. Some people may even want to use a trust to transfer business interests to prevent family members from starting unnecessary conflict due to the value of the company.
Estate planning as a business owner often requires a little more consideration, but it also provides you with more of an opportunity to have an impact on others.