Estate planning is important for every adult, but entrepreneurs have their own special considerations when it comes time to develop an estate plan.
For most small business owners, their business represents the largest portion of their assets. An estate plan ensures that control of your business goes to the person you have chosen. Otherwise, intestate laws distribute assets according to who is your closest heir. This means that a relative with little or no business experience could end up in charge of of the company you've worked so hard to create.
If you are running an owner-dependent business where all elements of the business require your direct involvement, your business may not be expected to continue after your passing. However, estate planning is still needed in order to address liability issues that could affect your heirs. Continued liability insurance guards against legal actions taken by dissatisfied customers after the business owner's death. There are steps that can be taken to reduce the applicable statute of limitations in order to minimize the opportunity for customers to sue for alleged harm caused by the business, but these actions require the assistance of a skilled estate planning attorney.
Another important factor to consider is that even though owner-dependent businesses essentially become worthless upon the owner's passing, estate taxes could be assessed. For example, if there is no documentation of your intent to terminate the business upon death or retirement, estate tax would likely be assessed if you passed away unexpectedly due to an accident or sudden illness. If the business was thriving at the time of your death, the estate taxes would be a significant burden for your heirs.
Finally, entrepreneurs need to remember to update their estate plans on a regular basis. Statistics indicate that most business owners with an estate plan have not updated their documents in at least five years. Since tax laws change every year, this means their plans are likely to not take full advantage of all available opportunities. Estate plans must also be updated when the business expands or restructures its activities significantly.
How Can We Help?
If you're a small business owner, our Pasadena estate planning firm can help you create a plan that best addresses your specific needs and ensures that you'll be prepared no matter what the future holds. Please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com for details.