What Kinds of Elements Should Entrepreneurs Use in Their Estate Plan?
By: Barry E. Haimo, Esq.
September 30, 2021
As an entrepreneur, you understand the time and energy necessary to make your small business run smoothly and successfully. But it can be hard to predict what life has in store for us.
This is why that same effort should be applied to your estate plan. That way, you can ensure that your assets and legacy are protected — no matter what.
Putting together an estate plan can require complex financial details, time, and thinking about the future. It can feel daunting, but it doesn’t have to be that way with our unique process to help you successfully devise your plan.
What should the estate plan of an entrepreneur include? How does it differ from that of someone who works for an employer?
Your basic estate plan should begin with a will, but can include elements such as:
- Living Trust
- Durable Powers of Attorney
- Tax Efficiencies
- Buy-Sell Agreement
- Business Succession Plan
With the right help, you can understand the kinds of elements to use in your estate planning and feel comfortable throughout the process. Then you can rest easy knowing that your life’s work and assets are safe.
Start with a Will and Basic Estate Plan
The first step of any estate plan is a last will and testament, which directs the distribution ofyour possessions and assets. It ensures that in the event of your death, your business is divided up based on your wishes rather than becoming subject to your state’s intestacy laws. Your basic estate plan should include:
- Your will
- An appointed power of attorney, which appoints someone to manage your finances on your behalf in certain circumstances
- A healthcare directive, which identifies someone to make medical decisions for you if you are incapacitated
These three components ensure that your business property and assets are being inherited and managed by someone you trust. Your will also requires you to identify a personal representative, who manages your estate and allocates your assets.
But you need to include more elements in your plan if you want to avoid probate for your heirs and ensure a smooth transition of your business. One of these elements is a living trust.
Create a Living Trust
Planning a revocable living trust provides entrepreneurs with a sense of security beyond a basic will. Putting assets in the name of a trust has many benefits, including:
- More flexibility in the distribution and details of your assets
- Avoiding probate, which saves your heirs time, money, and stress
- Naming a trustee to oversee the management of your estate
- Increased privacy of your affairs
For entrepreneurs thinking ahead, a living trust is a crucial step in ensuring your valuable property is protected after your death.
Plan for Tax Efficiencies
It’s important to understand how tax laws will affect your estate on a federal and state level. And there are differences between income, inheritance, and estate taxes — not to mention tax laws surrounding your 401k, IRA, and retirement accounts.
But good estate planning can help you understand tax efficiencies and minimize costs to you and your loved ones in the long run.
Draft a Buy-Sell Agreement
Are you a co-owner in a small business? Then a buy-sell agreement is vital to your estate planning. A buy-sell agreement outlines how your share of a business can be redistributed after your death.
It can also keep the business in the control of pre-existing owners to avoid conflict and allow them to buy out the available shares. A buy-sell agreement has multiple iterations, so it is important to have professional support in establishing this portion of your estate plan.
Have a Business Succession Plan
The last step in your estate planning may be creating a succession plan. A solid business succession plan ensures that your business can continue running successfully in your absence.
While your will and trust identify who will manage and receive your assets, your succession plan identifies who will take charge of your business. It also provides a road map of sorts to make sure that important information is relayed to keep a business running smoothly.
Protecting your legacy — through protecting your business, assets, and estate — is vital for successful entrepreneurs. Understanding the elements of business planning that matter most to you is easier when you have a knowledgeable attorney on your side. Haimo Law can guide you through each step of your estate plan, tailoring your plan to best suit your needs, security, and peace of mind for the present and future.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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