Estate Planning When You Own a Business

October 1st, 2020
Estate Planning When You Own a Business

Estate planning is important for everyone, especially if you are a business owner. Once a business owner passes away, it is important that they have a will and trust to protect the business assets. These documents also provide information about how the business affairs and ownership should be handled after the death of the owner. Business owners should also get a Power of Attorney. 

As a business owner, it is never too early to start thinking about estate planning. Even if you are young and healthy, it is a good idea to put together these documents with an estate planning attorney in East Brunswick NJ. That way if something unexpected were to happen, your business and its assets will be protected and can continue on without you if that is your wish. Estate planning sounds a bit overwhelming, but it really boils down to a few important steps, documents, and procedures.

First Step: Get a Professional Will

Professional wills are necessary for people who own their own practices. This includes doctors, lawyers, mental healthcare providers, etc. A professional will explains what happens to the business if the owner passes away. This document names a person to be the “Executor” of your business. This means they can make decisions about your business should you pass away. In addition, they make sure that the will is carried out as the owner intends. This person will need access to things like your patient list, insurance policy documents, contact information of employees/contractors, and business bank account information. 

Having a professional will is crucial in the medical world. While it’s difficult to think about your death, consider what would happen to your patients if you suddenly passed away. Imagine a mental healthcare provider with patients who rely and depend on their weekly appointments to help keep their health stable. It is so important that you have a plan for what would happen if you were suddenly to pass away. A professional will is just the document to do that.

Set Up a Trust

A trust is a document that gives another party the authority to handle your assets. Trusts go hand-in-hand with wills. The trust allows for management of assets which is something a will does not do. It is important to set up a trust so that your business or practice can continue to run after your death. A trust allows the survivors of the business owner to avoid going through probate. Probate is the process in which the government and courts handle your estate after you pass away. The process can be long and drawn out, but proper estate planning can make the process much more simple. Wills can be contested. Trusts can too, but the process is a lot more difficult, giving your assets further safety. Setting up a trust is also a good strategy to reduce tax burdens.

The trusts can also designate who in the family will take over ownership of the business when the owner passes away. For example, one of the owner’s children may be interested in taking over the business while the other would want to sell. The trust can designate the one child to own the business while the other receives a payout of assets over time. A trust helps prevent unnecessary family drama after the owner’s death about what will happen to the assets and the business as a whole.

Powers of Attorney

A Power of Attorney is an official document that gives someone the power and authority to act on your behalf if an illness or accident leaves you unable to make these decisions yourself. The designated person can make both medical and financial decisions. It is extremely important that this person can make sound decisions for you in case you become incapacitated. As the owner of a business, this is crucial. You need to keep your business running even if you are unable to do so yourself.

While no one wants to think about worst case scenarios, what would happen to your business if you were in a coma after a horrible car accident? Who would handle financial decisions? The designated person is also allowed to sign necessary documents since the owner will not be able to sign themselves. Additionally, the Power of Attorney allows the designated person to make medical decisions. Make sure that you have made it clear in the document what your end of life wishes are. Typically, a Power of Attorney is no longer valid once the principal passes away.

Estate Planning for Business Owners

Owning a business, medical, or law practice is a lot of work. In addition to running the day-to-day operations, owners must also understand the legality issues that go with running a business. Unfortunately, this includes estate planning. This means you need to plan for your business if you pass away, are incapacitated, or unable to make decisions.

The first step is getting an experienced estate planning attorney in East Brunswick NJ that you can trust. This person will walk you through the estate planning process to make sure that you have all the necessary documents. This ensures that your business or practice is protected even if something were to happen to you. Examples of important estate planning documents include wills, trusts, and powers of attorney. All three of these documents have specific purposes that will take care of business-related things after you pass away or if you are unable to make decisions. For more information about estate planning, contact Bowne Barry & Barry today.