As an entrepreneur, it is natural to be engrossed in your business’s day-to-day operations like processing payrolls, updating the inventory and figuring out how to grow your business. Consequently, it is not uncommon to fail to prepare for life’s eventualities like incapacitation and death.
However, it’s important to note that estate planning and your business are intricately linked. Besides ensuring business continuity, incorporating your business into your estate plan also safeguards your loved ones’ well-being.
Here are two estate planning tools that you can use to incorporate your business into your estate plan.
1. Setting up a living trust
A living trust is a vital tool for any business owner. This estate planning tool allows you to let a separate entity “own” your business. Unlike a will, a living trust comes with a number of benefits like avoiding probate and minimizing expenses like some estate taxes. Most importantly, a living trust transfers your business to your beneficiaries immediately upon your death.
2. Include buy-sell agreements
If you are in a partnership with other individuals, or if you have multiple beneficiaries, then you might want to incorporate a buy-sell agreement into your estate plan. This provision stipulates that should you die, the surviving partners can buy your share of the business. If you have multiple beneficiaries, a buy-sell agreement allows beneficiaries who are interested in continuing with the business to buy out those who are not interested.
Family businesses hold a special place in the economy, with entrepreneurial acumen passed down within families from one generation to the next. Without proper planning, however, these dreams might never come true. And this is where incorporating your business into your estate plan comes in.