A comprehensive estate plan tailored to your life is essential to provide for your loved ones and protect your legacy when you are gone. Estate planning for business owners brings unique challenges as you weave succession planning into your estate plan. 

Contact BMK Legal to help ensure everything falls into place. Our lawyers have experience in business law, estate planning, and the intersection of the two. We can explain your options and then work with you to determine how to meet your goals. Once we understand what you want to accomplish, we draft legal documents and workshop them with you until they say what you need them to say.

Estate Planning Basics

In your estate plan, you declare who takes possession of your property and through what legal processes after you die. An estate plan for a small business owner usually includes a will and one or more trusts. It may also involve other property transfer mechanisms, powers of attorney, and advance healthcare directives.

Wills

In your will, you decide who should receive which assets and in what proportion. For your will to be legally valid, you must be at least 18 and of sound mind when you make it. And it must be:

  • Reduced to writing,
  • Signed by its creator, and
  • Signed by two witnesses.

When you die, property in your will temporarily transfers to your estate. Your loved ones must complete the probate process to officially pass the property to new owners, which can take several months to more than a year.

Trusts

Trusts are flexible legal instruments that allow people to set aside property for specific purposes on specific terms. They can bypass probate, allowing property to change hands more quickly.

They may be revocable or irrevocable. Generally, revocable trusts allow the trust creator (“grantor”) to retain more control, while irrevocable trusts can shield assets from creditors in the right circumstances. You can also create trusts when you are alive—inter vivos trusts—or after you die—testamentary trusts. 

Trusts can have many purposes, like:

  • Protecting your assets,
  • Qualifying for Medicaid,
  • Caring for a disabled person without jeopardizing their benefits, 
  • Caring for a financially irresponsible person, or
  • Charity.

An experienced trusts and estates lawyer can guide you through tailoring a trust to your unique needs.

Non-Probate Transfers

Estate plans also frequently include other assets that transfer ownership without a will, called non-probate assets. Other than trusts, common non-probate assets include:

  • Transfer-on-death or payable-on-death designations,
  • Life insurance policies, and
  • Retirement beneficiary designations.

Frequently, you use these assets to balance discrepancies created by assets that are difficult to divide.

Powers of Attorney and Advance Directives

Arranging for your care as you age is another part of estate planning. These arrangements only activate if you become incapacitated—legally unable to make your own decisions due to physical or mental health.

These plans may involve a living will, which is an advance medical directive where you establish what medical treatment you do or do not consent to before you need it. 

Powers of attorney can be medical, financial, or both. A medical power of attorney makes decisions concerning your health treatment, and a financial power of attorney makes decisions about your financial situation.

Estate Planning for Small Business Owners

At the start of business estate planning, you typically want to designate a financial power of attorney. That person can take over for you and manage your financial and business decisions—vital assistance in cases of the unexpected. 

Powers of attorney expire at death, so you must make plans beyond that. Those plans depend on the business, your role in it, your percentage of ownership, and whether you have successors. 

Essentially, there are two deceptively simple outcomes for your business: whether it will continue or not. Each has its own considerations in estate planning for small business owners.

Joint Estate and Succession Planning

Several techniques can help you plan for withdrawal from a business, typically involving amending your business’s governing documents or adopting new ones. You can establish terms for transferring ownership interests and responsibilities in those documents. Businesses with such provisions are often called family limited liability companies (LLCs).

You can also use your will to establish who should receive what assets and responsibilities. In that case, you may need to use stopgap measures to ensure your business remains operational during the probate process.

Using a business trust is also common, where you designate a trustee to manage the business on behalf of beneficiaries. Through the trust, you can make provisions for the transfer process and ensure someone has authority over the company at all times.

Joint Estate and Wrapping Up Planning

Sometimes, a business ends with you. If you cannot or do not want to sell your business, you can plan how to wrap it up in your estate plan. These plans may be part of the business’s governing documents, part of your will, or part of a separate instrument like a trust. 

Business Interest Transfers in Business Estate Planning 

The less control you have over a business’s activities, the less you typically need to account for it in the business estate planning process. However, whether you can leave your interest in a business to someone else when you die depends on the company.

In publicly traded companies, you can typically leave stocks to others when you die without restrictions. Other businesses may restrict transfer, usually detailed in their governing documents or the purchase terms. For example, you may not be able to leave a partnership interest to someone else without the consent of the other partners.

Focusing on Estate Planning for Business Owners

To ensure your estate plan is efficient and effective when you are a small business owner, you need lawyers with experience in both business and estate planning. You will find that in BMK Legal’s lawyers. Our award-winning lawyers have extensive experience working with business owners to establish estate plans that meet their desired goals. With a customer-centric focus, we have the knowledge necessary to handle even the most complex plans. Contact us today to get started.

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