Estate and succession planning is critical to save a business from estate taxes and continue business operations during the transition. This is more critical for small and family-owned businesses, which are considered as the deceased's estate. Transfer of ownership to inheritors can eat up a big portion of the value of the business. For an incorporated company or partnership with appointed managers, succession planning is more a question of leadership, continuation of operations and the transfer of shares.
The following issues have to be considered during succession planning:
Once the naming of a successor is settled, the continuation of business policies and operational processes can be addressed – as in whether the successor has to continue to follow existing policies and business structure. One issue in this regard is about disposal of the business. Named inheritors may have no interest in running the business or keeping an ownership stake. This can be controlled through succession planning.
All property, shares and other assets will have to be transferred into the control of the successor. If the owner has deceased, then estate taxes have to be considered. There are many ways to limit the tax amount due, including buy-sell agreements, gifting and insurance.
Do you have legal questions regarding estate and succession planning? Our business law attorneys can help. Contact a business lawyer in your area today to learn more about how you can receive legal representation regarding succession planning and your business.
Did you know?
Insurance benefits can be kept out of the deceased's estate with proper estate planning.
A primary aim of estate and succession planning is to reduce the estate tax applicable. One good way to do it is to transfer ownership of insurance policies to someone else. This can be the beneficiary or an irrevocable life insurance trust. If the policy does not belong to the owner anymore, then it will not be a part of the estate.