By Sarah Stewart Legal Group, PLLC
Estate planning helps families preserve their assets and make sure they go to the right people at the right time if a family member dies or is unable to care for themselves. Estate planning can include a variety of documents and roadmaps to reach each individual’s planning goals.
Though estate planning is important for everyone, business owners face unique challenges when it comes to protecting their families and businesses if something happens to the owner. If you are a business owner, make a plan for your business to help your family.
Entrepreneurs require more complex planning than their employee counterparts. Not only do business owners have to plan for what happens to their families and things when they die, they also have to plan for their business. As a responsible family member and business owner there are several items you want to consider to properly protect your business and family.
Disability insurance can replace your income if you become disabled due to illness or injury. Call an insurance agent to find out how you can sign up and make sure you can still pay the bills if you become disabled.
What would your family do if they lost your income? Could they survive month-to-month? If not, and let’s be honest, the answer is usually not, how much would your family need to pay the mortgage/rent, buy food, clothe themselves, and pay for utilities if you weren’t contributing? You need enough to cover those costs and add some extra cushion to help them get back on their feet after your death.
You will also want to consider life insurance to help keep the business alive while your family grieves. Family members may not be educated in your business and may have to hire outside help or sell your business once you’re gone. Consider the costs that will come with that and get life insurance to cover them.
Finding a Successor
You need to find someone who can take over if something happens to you. If your family is involved in the business, figure out if anyone is interested in and capable of taking over. If you’re a solo entrepreneur, find someone to start grooming to take your place.
If you own your business with other people, think about how you would want your families to be bought out by your business partners and put it in your agreement.
(2) Document Your Plan
Though there are many places you can go to make these documents yourself, you will want and need the help of professionals. This is not a place to cut corners. Sitting down with an actual person and talking through your plan will help you determine what documents and plan are best for you.
But, at minimum, you will need a will and/or trust, durable powers of attorney, healthcare directives, and proper beneficiary designations on your stocks, bonds, and other assets that allow such designations.
If you are in business with other people, I highly recommend a business agreement. This contract will discuss how/when owners can buy/sell their portions of the company and will discuss what happens when an owner is disabled or dies. Without these documents, if owners disagree, courts will make these decisions for you.
(3) Talk About It
I understand that talking about death isn’t fun, but it is inevitable. Talk to your family about your plan. Tell them where they can find it if something happens to you. Keep a list of passwords, accounts, assets, and debts in a safe place where they can access it when they need it.
Planning and thinking about the future without you in it can be difficult, but it is the best thing you can do for your family and business.