Operating a business dependent upon your skills and expertise makes you a very valuable person to your business, but could leave your income (and your family's well-being) at risk if and when something happens to you.
Maybe you have not considered how important estate planning is because you've just accepted the fact that your business will end when you do.
But it is important to understand that your family could be left with a significant financial burden when you die.
If you handle business operations, the value of your business is intimately tied to you and the work you put into it. Thus, the value greatly reduces after you die. Even so, your family could be stuck with an estate tax that reflects the value of your business right before your death.
To offset this financial obligation, you have a few options:
Get life insurance in place to provide liquidity to pay estate taxes and wind down the business after you die (also consider disability insurance, in case you become incapacitated first);
- Consider a full succession plan that considers all the possibilities for the future of your business after you are gone;
- Clearly document your intent to have the business close its doors when you die and limit the transferability of the business, so that your family can clearly prove there is no value without you.
Also, consider extending liability insurance for a period of time after your death. This will account for the statute of limitations under which clients or customers can file a claim, thus reducing your family's liability.
Protecting your business and your time is valuable. If you want to move forward with preventative planning, start by sitting down with us. We can guide you in making the difficult decisions you face every day as a leader in business, including how to create an estate plan that will protect what matters most. We can look out for your business's future, so you have time and energy to focus on growth and expansion.
We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.