Building a successful company in today’s cutthroat competitive world is not easy. Even so, all your efforts can be washed down by a single mistake in your estate planning. Your company may end up in the wrong hands. The wrong heir can run down even the most stable company within a few months and jeopardize the livelihoods of your employees while putting your family at risk of financial ruin.
Most people think the only time their kids’ names are dragged to court is when a child support attorney is included in the case. Whether you’re in Denver or Los Angeles, child support and custody battles are the common legal cases that involve kids. But estate planning battles involving business empires are becoming quite common. Your kids might be part of a case involving the succession of your estate, even if they are minors.
To protect your business and the livelihoods of your employees, and negate costly court battles that leave family relations frayed, the right estate planning tools are essential. Regardless of your business’ size, the following are some of the crucial tools for planning your succession:
Wills
A will detailing your assets and distribution process is essential. In the will, you can name the person who will manage the distribution of your business assets if anything happens to you. If you have registered the business as a sole proprietor, it is crucial to specify that your will’s executor has access to your digital assets. These include online bank accounts, social media sites, and email accounts. For these, you should have a separate and secure document listing the passwords to keep the details of your will from being publicized.
Power of Attorney
Grant a power of attorney to the person who will handle the affairs of your company if you are incapacitated. You can choose a family member or business partner to manage your business accounts, make payroll, and pay vendors. If you lack power of attorney, courts will appoint anyone they deem fit to handle your business affairs if you are incapacitated. This might cause a conflict between your family members and other business partners.
Trusts
If you need to protect sensitive business documents, simply writing a will might not be the best solution. Moreover, the delays in probate might cost your company valuable time. A revocable living trust is a better choice for estate planning in this instance. It allows you to continue managing your business, and the trust’s beneficiary automatically takes over when you pass away or are incapacitated. You can change the trust’s beneficiary if need be.
Buy-Sell Agreement
The buy-sell agreement details how your business will be distributed in time of a divorce, bankruptcy, or even after your death. It specifies how the company will be valued. The common buy-sell agreement types for estate planning in business include stock-redemption and cross-purchase agreements.
Everyone, no doubt, needs an estate plan irrespective of what or how much he/she owns. Even so, the above estate planning documents are all the more essential for an entrepreneur. They work differently for different companies, and guidance is crucial when drafting those for your estate plan.