There are many reasons to back the claim that virtually every adult needs an estate plan, many of which aren’t directly related to your assets. Durable powers of attorney allow people to make financial decisions on their behalf, whereas a healthcare power of attorney authorizes individuals to make medical decisions per their wishes. Both documents are fundamental in terms of incapacity planning, and they are vital components of an estate plan. However, these documents are likely not the first to be mentioned when the topic of estate planning arises. If you ask someone what an estate plan does, they may say it transfers your assets to your designated beneficiaries. Although this is true, it is only one component of what an estate plan can achieve.
Estate planning also is paramount for business owners. Regardless of the size of your business, you should strongly consider meeting with an estate planning attorney. However, we will discuss why estate planning is so critical (particularly to the business owner) because others depend on that business’s future. If the owner should pass away without an estate plan, it becomes another asset that has to pass through probate. The probate process could take several months or years, depending on the circumstances. Like the person who becomes incapacitated, there will likely be people willing to run the business, but legal obstacles will prevent them from doing so. If multiple partners run the company, they are left wondering who will inherit the deceased’s owner’s shares. They will be forced to share ownership with someone who may not know anything about the business; they may also intend to sell to a third party.
Estate Planning As a Solution
When you begin a business, consult an attorney to create succession plans and buy-sell agreements. A buy-sell agreement is a formal contract that the business owners sign. It identifies what happens to one of the owner’s shares if they leave the business, retire, or pass away. Depending on the terms of the agreement, it can force the person leaving to sell their share to the other owners—or at least give them the right of first refusal.
Attorneys can also include language that explains how the transaction will occur. For example, how will the departing owner’s shares be valued? Even if the owner passes away, they ensure their estate will get fair market value for the shares they are being forced to sell to the other owners. Because this transfer will likely require significant amounts of money, a well-written buy-sell agreement can address how the remaining owners can fund the purchase. Are they allowed to use money generated by the business itself, or must they pursue other options? You and your partners must discuss and answer these questions through legal counsel.
Beckemeier LeMoine Is More Than an Estate Planning Firm
The question we addressed here is what happens when a business owner passes away unexpectedly or leaves the business for any reason. You can take steps to secure the company’s future so you are prepared for either contingency. Our firm will assist you with creating the buy-sell agreement that protects you and your business. Though we only addressed a few points, it is essential to remember that when someone leaves a company suddenly, significant variables surface as a result. Beckemeier LeMoine is built to handle them. For professional legal counseling regarding business law, estate planning, or both, contact Beckemeier LeMoine to schedule your consultation.