Don’t Forget Your Business When Planning Your Estate
By: Barry E. Haimo, Esq.
September 5, 2014
When most people hear the words “estate planning,” they think about Wills and Trusts. After all, an estate plan is supposed to help you to put your personal finances in order when you die, right?
While that’s absolutely true, estate planning can and should go far beyond that. One thing that few people consider is how business planning can factor in to your estate plan. Doreen learned this the hard way when her husband Jim passed away.
You see, Jim had built up a very successful restaurant with his partner, Brian. Brian was the chef, and Jim was the business manager, handling all the logistics so Brian didn’t have to. Over time, they grew very successful, even expanding to include several food trucks and catering local parties.
As you might imagine, they had a very close working relationship, and their business depended on them being able to work together and put their very individual and specific skills to use. When any key business decision needed to be made, they worked together to ensure that they could maintain the quality of their food and service while still making a profit.
So when Jim suddenly had a series of strokes and could no longer work, it affected both Jim’s family and the business. How were they going to move forward? Doreen offered to step in and handle manage the business, but she knew she couldn’t replace what Jim brought to the table. And besides, Brian didn’t really want to have to learn to work with someone new after decades of melding his talents with Jim’s.
How would Doreen pay the hospital bills without Jim’s income? Could Brian legally sell the company since Jim owned half of it? Things had happened so quickly that he and Jim had never really gotten around to writing up the appropriate paperwork, and everything was a big mess.
In the end, it took years of working with lawyers and going through probate to figure out how to move forward. Years where both Brian and Doreen were put under undue financial and emotional stress as they struggled to stay afloat. Eventually it all worked out, but both Brian and Doreen would have done anything to erase those painful years.
The worst part is that all of that could have been avoided by making business planning a priority. Jim and Brian should have created partnership agreements, shareholders agreements, buy-sell agreements, and so on, as well as invested in several insurance plans, including key-man and disability.
By spending just a little bit of time setting up those things earlier in their lives, they could have ensured that they were protected and the business and any money from it was “owned” by various trusts designed to manage it according to their wishes. Keep yourself from having to go through something similar by making sure you include business planning in your estate planning.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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