Estate Planning Considerations for Small Business Owners
Your small business is more than just a venture – it’s a substantial part of your life’s work. So, as you enter your golden years, you may begin to think about what will happen to it when you’re no longer here.
The answer, as you may expect, will depend on the nature of your estate plan. If it’s strategically crafted, you should be able to ensure a seamless transfer to your chosen successor.
With that in mind, let’s take a look at some important factors to consider as you draft your estate plan:
Life insurance plays a pivotal role in ensuring your small business continues to prosper – even in your absence. The payout on that policy will allow your beneficiaries to cover your organization’s debts, taxes, and other financial obligations, preserving its value well into the future.
Before choosing your life insurance policy, it is generally a good idea to analyze your company’s financial well-being. Doing so will make it easier to select the right coverage options.
Many business owners believe that creating a will is the best way to ensure a smooth transfer to their chosen successor. In many cases, however, a living trust is a better option.
That’s because, unlike a will, a living trust can allow the business and your loved ones to bypass probate. As a result, it can knock months or even years off the transfer process.
A living trust will also allow your business to continue operations if you become incapacitated.
A succession plan is a document that details the way your company should be run if you are not able to perform your duties. It covers death, incapacitation, and even retirement.
A succession plan generally contains the following information:
- The name of the successor
- The timeline of succession
- The company’s standard operating procedures
- A summary of the organization’s finances
By drafting a written succession plan, you can prevent disputes about the future of the company.
Estate and Inheritance Taxes
As you create your estate plan, you may also want to assess whether or not your loved ones will be subject to estate or inheritance taxes if you leave them your business.
California does not have any estate or inheritance taxes – but the federal government does. Your estate will be subject to taxes if its value exceeds the filing threshold ($12.92 million in 2023).
See our, “Will My Child Need to Pay Estate Taxes After I Die?” blog for a more detailed overview of estate taxes and ways to minimize them.
A California Estate Planning Attorney You Can Count On
Would you like to have a skilled estate planning lawyer in San Diego help you draft a succession plan, reduce your child’s estate tax burden, or set up a living trust? If so, please don’t hesitate to contact the team here at the Semanchik Law Group. We’ve been helping local business owners prepare for the future for years, and we’d love to do the same for you!
To set up a consultation, all you need to do is give us a call at (619) 535-1811 or send us a short message online. We look forward to working with you!