Seeing your small business thrive and achieve a steady income is very rewarding after working day and night for years in order to achieve stability. But let’s face it, you won’t be around forever to keep managing and overseeing your business. There will come a time when you need to pass your legacy to the rightful heir.
There will be unavoidable fees that your successor would have to pay in order to successfully transfer your business to his or her name. There might even be some disputes in the family if you do not put in a legal document how your assets will be divided accordingly.
Even if you have a small business, you need an estate plan to protect your business as well as your successors after your death. It is prudent to deal with the matter as soon as possible; you should start the process by selecting a trustworthy law firm. Cloud Peak Law, for instance, specializes in estate planning, helping clients avoid unnecessary tax problems during an already challenging time.
An estate plan covers all the details about how your assets would be divided–from real property, business interests, to the amount of cash you have. It guarantees that your wishes are fulfilled and it protects your family with a continuous stream of income and prevents your assets from being taken away from them. Estate plans can also reduce and defer federal estate taxes–it would depend on the terms and clauses you include. Most estate plans cover these six components:
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Will
Your will includes all the details regarding how and to whom you want your assets to be distributed. It also states everything your will executor would need to proceed with the transfers.
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Trusts
Trusts come in two categories–irrevocable and revocable. Irrevocable trusts are permanent, while revocable trusts can be changed as long as the grantor is fit to make changes. Trusts could reduce legal fees and estate taxes and can also speed up the transfer of the properties to your heirs.
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Insurance
Insuring your life as well as buying insurances for your children can help protect your assets and defer estate, income, and gift taxes. There are several types of insurance coverage you can purchase that you should ask your advisor about.
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Power of Attorney
Assigning a trustworthy person to handle all your business affairs in case you can no longer manage transactions involving your business and property transfers would save you from the court appointing whom they think is the best guardian to handle your affairs. By already assigning a power of attorney to your estate plan, you will be sure that the person is acting with your best interests in mind.
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Buy-Sell Agreement
If you are not the sole owner of your business, there must be a buy-sell agreement included in your estate plan. This legal document binds all owners into a concrete action plan regarding the future of the business in case one of the owners dies or become disabled. Buy-sell agreements include the price of buying and selling your share of the business so your family would be assured that they will receive the rightful amount.
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Succession Plan
A succession plan is a more detailed document outlining what happens to your business when you die. The people you want to be involved in managing your business, as well as the necessary documents and courses of action, are also included in this legal document.
