Estate planning should be a top priority for anyone who has built and grown a successful small business, especially if they intend to build generational wealth and create a legacy. Yet, while most Summerlin business owners focus on day-to-day operations and growth, the thought of leaving or selling their business often takes a backseat. This article highlights the importance of early planning to secure the future of your business and provide for your family.
Why Is Estate Planning Crucial for Small Business Owners?
The complexities business owners face are significant compared to typical employment scenarios, making professional legal guidance indispensable. The title of a recent article from Business Insider says it all: “You might not want to think about estate planning, but as a financial planner, I know it’s essential for small-business owners.”
Understanding Basic Estate Planning Documents
There are more complex issues for business owners than employees for estate planning. Therefore, be sure to work with the experienced estate planning team at Stone Bybee & Associates who will create a plan to protect you, your family and your business. As you go through the process, keep the following basics in mind.
Last Will and Testament. This document is the foundation of an estate plan, providing directions to the state probate court regarding your wishes for distributing assets. It also names a guardian responsible for minor children upon your passing. If you don’t have a will, assets are distributed according to your state’s intestacy laws, typically based on kinship. You can update and change your will throughout your lifetime, and it should be reviewed every three to five years.
Revocable Living Trust. Having a revocable living trust gives you more control over assets, which could be necessary to distribute business assets. A revocable living trust can be altered while you are living, so changes in your business can be reflected in the directions in the trust.
Financial Power of Attorney. This document is critical if you are the business owner who performs most of the financial tasks of your business. When a business owner becomes incapacitated, having someone named Power of Attorney gives the POA the ability to pay bills, make bank deposits and withdrawals, file business and personal taxes and make any other financial decisions you wish. POA can be limited if you only want someone to pay bills, or they can be broad, allowing the agent to do anything you would do to keep the business running while you are incapacitated. Your estate planning attorney can craft a POA to suit your needs.
Business Succession Plan. A business succession plan should be in place as soon as your business gains traction and becomes successful. Distributing shares of the business after you pass is fine. However, what if your heirs don’t have a clue how the business works? Do you want them to sell it after you pass or maintain it for the next generation? A succession plan requires the help of an estate planning attorney, CPA and financial professionals to create a management team, define roles, set performance guidelines, etc.
Digital Estate Plan. Like most people, Summerlin residents spend a lot of time online, which means safeguarding a business’ online assets and visibility should be top priority. If your business is online, has a website, and uses social media, online finances, and cell phones, you need a digital estate plan to identify assets and provide instructions on what you want to be done with those assets after you have passed.
Review Beneficiary Designations. Any account that can name a beneficiary, such as retirement plans, investment accounts, or life insurance policies, must be reviewed every few years or whenever a trigger event, including birth, death, divorce, or remarriage. Upon your passing, these assets will be passed directly to the beneficiary. Be sure the person you named twenty years ago on your life insurance policy is still the right person to receive proceeds upon your passing.
The Importance of Early Succession Planning
According to Crain’s Cleveland Business, effective exit planning in Summerlin is intertwined with successful business planning. Frank Fantozzi, a certified exit planning adviser, underscores that for many owners, their business is their largest asset.
Aligning Business Goals with Succession Plans
Early integration of succession planning into your business strategy helps stabilize your business and preserve its value against unforeseen circumstances like death or disability.
Owner Readiness and Market Readiness
Preparing for exit involves assessing both personal financial needs and the business’s ability to meet these without your direct involvement. Achieving a ‘Best in Class’ status can significantly enhance the value of your business.
Navigating Legal and Financial Challenges
Succession planning involves complex legal and financial considerations. Structuring transfers, understanding tax implications, and ensuring compliance are areas where professional advisors are crucial.
Conclusion: Why Summerlin Small Business Owners Need to Plan Now
Planning your estate and business succession early secures your legacy and ensures continuity and stability for your business. Attorney S. Craig Stone II and the business planning team at Stone Bybee & Associates are committed to guiding Summerlin small business owners through these vital processes, protecting what you’ve built for future generations.
For personalized advice and to start your journey in estate and succession planning, request a consultation with experienced professionals who understand the local business landscape and legal requirements in Summerlin and the surrounding areas.
References: Business Insider (March 22, 2024) “You might not want to think about estate planning, but as a financial planner, I know it’s essential for small-business owners”
Crain’s Cleveland Business (November 6, 2023) “Why exit planning is effective business planning”
