You've worked hard building your business. Whether you started it from the ground up or took over the operations from your family, you put all you had into it. No matter what happens, you want to know that you've done all you could to set your business up for success. That includes planning for when you're no longer able to run your business yourself.
When planning your Estate, there are some important tips you should know about keeping your business in the family and making sure that your legacy lives on. Keep reading to learn how to:
Prepare Your Beneficiaries for the Future
Bequeath Your Family Business
Get Started on Your Estate Plan Today
Prepare Your Beneficiaries for the Future
Some families begin preparing their next of kin to take over the family business throughout their lives. Working on the weekends and through the summers and slowly taking on more responsibility as they get older. Other families choose to wait until their children are older and can make the decision to go into the family business on their own. Depending on how you've run your venture over the years, you may already have someone in mind to take over the reins when it's time for you to step down.
Deciding when to walk away from your business is the first step in planning for its—and your—future. It's the first decision that sets the rest of your plans in motion. To ensure a smooth transition, you may want to bring up the possibility of taking over the family business to your potential Beneficiaries before naming them in your Estate Plan.
Receiving an inheritance can put pressure on a Beneficiary, no matter how wanted or well intentioned. Before leaving your legacy in the hands of your children, you should be sure they want it. Leaving your business to someone who isn't ready to take it on completely could put your company and family at risk.
Part of preparing your business for operations without you is to allow your Beneficiaries the time and opportunity to learn from you. If you intend to leave the family business to all of your children, making them each an equal stakeholder in the business, you may need to catch someone up to speed on managing the day-to-day operations. A parent may also choose to leave the business only to the child or children with the skills and interest in running the business and taking on its full range of responsibilities.
Bequeath Your Family Business
You know you want to ensure that your business stays in the family, but how do you go about it? Here are options for leaving your business behind to your family and ensuring your legacy:
Forming a business partnership
One of the first ways you can begin to let go of the reins of your business is to form a partnership. By teaming up with those who will eventually inherit your business, you can ease them into the personal and financial responsibility they are in line to take on. However, in the event of your death, your business would be involved in Probate Court, accruing taxes and court fees, just what you were likely hoping to avoid by forming a partnership.
Gifting your business
You may think of gifting your business to your Beneficiaries, which could help save you and your Beneficiaries come tax time. The IRS allows individuals to gift a total of $14,000 in cash or assets, up to $5.45 million over a lifetime. The yearly sum doubles to $28,000 if you are married and their name also appears on the gift. This option works best if you have a young business or a small venture worth less than $5.45 million. Otherwise, your Heirs could wind up with a substantial tax bill.
Writing your business into your Will
Once you've chosen the perfect Beneficiary for your business, make it legal by naming them in your Will. It's important to be specific. Rather than stating that you are leaving your family business to your children, name them specifically, so there is no room for confusion or mismanagement. Your Beneficiaries will be glad you did when your Will goes through Probate Court. Wills that go through Probate Court are a matter of public record, so if you don't like the idea of anyone being able to find out the exact worth of your business and Estate, as well as who inherited it, this may not be the best way to Bequeath your business.
Putting your business into a Trust
A Trust can save your family on state and federal taxes while keeping your affairs private. Because Trusts skip Probate, allowing assets, including businesses, to transfer seamlessly from one individual to another, your business wealth and information won't be a matter of public record.
A Trust-Based Estate Plan may also be a better option for small business owners with family members who don't always get along. While some conflict among families is natural and people typically resolve a conflict quickly, not all families are so fortunate. A family member who feels like they didn't receive their "deserved" inheritance could potentially hold a Will up in Probate Court for months or even years. That doesn't just stop your Beneficiaries from receiving their inheritance. It could also disrupt business operations.
Get Started on Your Estate Plan Today
Keeping your business in the family and ensuring a long legacy they can take pride in is an admirable goal of any small business owner. Making it a reality is easier than ever with the help of Trust & Will, the leader in online estate planning.
Regardless of your financial situation or plans for the future, our team of estate planning experts can help guide you through everything you need to know about leaving your life's work to those you love and trust the most. Get started creating your customized online Estate Plan today!
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