Estate planning for entrepreneurs

March 06, 2013 (Press-News.org) Estate planning for entrepreneurs

Article provided by Louis Pacella Law Offices
Visit us at http://www.athomeplanning.com/

Running a business takes a lot of time, energy and attention. People who own their own businesses can sometimes feel like they do not have time to take care of other things in life outside of the business. However, business owners should take the time to engage in careful estate planning so their families and businesses are protected after they are gone.

Plan for business succession

A classic estate planning mistake that many people -- not just business owners -- make is not having a plan at all. Dying intestate, meaning without a will, can cause more complications for people who own their own businesses than those who do not, however.

If a business owner dies without a will or a business succession plan, his or her assets will go to his or her spouse or other next-of-kin according to state distribution laws. The state's distribution laws may not reflect what the business owner wants for the future of his or her company, though, especially if the business owner would like a non-family member to take over.

Business owners should consider drafting buy-sell agreements detailing how shares of the business should be sold when one partner dies, becomes unable to work or simply wants to sell. The business should also consider purchasing buy-sell insurance so the company has sufficient funds to purchase a partner's shares from the partner's heirs.

Protect the family

Business owners also need to ensure their families are financially secure after they pass. Entrepreneurs should consider taking out disability and life insurance policies so their families have money to cover expenses if the owner is unable to continue working.

Business owners should also utilize key estate planning strategies to pass on as much wealth as possible to their heirs while reducing estate taxes. A common method employed to reduce the size of an estate and secure its assets for future generations is an irrevocable trust.

Estate planning tools can also help separate business assets from personal assets more definitively and help avoid potential situations where business creditors pursue family funds for business debts.

Assemble a team

Successful estate planning is similar to successful business planning in that both require a team of professionals. A business owner should make sure that any financial planners, accountants, insurance agents and estate planning attorneys are in communication so they can work together to meet the business owner's estate planning objectives.

A good first step is to contact an estate planning attorney who can help begin to put the pieces of the estate planning puzzle into place.