Business owners and entrepreneurs often plan for the growth and future of their companies but neglect to plan how to protect them if anything were to happen to them. To ensure your business and family are protected, you should make an estate plan as part of your business plan. You’re not alone if you don’t have a will: over 50% of adults in the US don’t have one. Business owners have lots to worry about when it comes to their assets, their customers, and their employees!
Nevertheless, it would be best to always prepare for the worst while hoping for the best. If you don’t have a will, everything you’ve worked for will go down the drain in the event of your untimely demise. That’s not what we want under any circumstances, and we can speak for everyone when we say that.
However, it is impossible to predict the future. Therefore, it’s best to plan ahead. It is called a dying estate when you die without leaving a will. When this happens, the state handles your assets and distributes them. Maintain your will so there is no confusion when the distribution occurs among your loved ones. So, to avoid any confusion, you must prepare a will in your life. In light of this, let’s talk about estate planning.
The estate plan
It is an instruction manual of sorts, directing whoever is in charge (according to the will, of course) on how your estate or assets are to be handled. It also includes details regarding your heirs, how the future finances will be paid etc. if you have any children, it should state who will be their legal guardian. Therefore, you must get a will drafted if you already don’t have one to safeguard the future of your assets and loved ones. Remember that your will is included in your estate plan.
Why business owners should make a will
We will now discuss why business owners like you should have a will.
To allow your business to continue
If you haven’t left a clear directive on what will happen to your business after your death, there is little to no doubt that chaos will ensue. Depending on what kind of business you have or the structure it’s built on, there are some questions that you should ask yourself:
- Who will preside over the business?
- What will be the fate of the company shares?
- Who will inherit what part of your estate and how much? Family, shareholders, etc.
- How will the distribution occur? Is it according to the existing shareholder agreements?
If part of your business holdings come under a separate trust, they cannot be a part of your state. So what will happen to those holdings?
Clearly, it is a complex process, with a web of decisions, possibilities, and consequences that you need to anticipate, you know, while having the cloud of doom looming over your head. So it is a more appropriate and responsible approach to leave instructions to whoever is next in line, so the confusion level stays at a minimum.
As we discussed before, in the case of a dying intestate, your assets are at the mercy of the state, with your loved ones having no control over them. Moreover, their distribution will most likely not be according to your wishes or your family’s. The fact that things can and will get complicated is an understatement. Your family will probably be drowning in documents and legal claims without a will.
By default, if you are married and have children, the estate naturally goes to your other half and will eventually be passed onto your child or children. However, if you are not married or have children, the estate would pass to someone like a parent (if they are alive) or, in a more likely case, a sibling, aunt, or uncle. If those possibilities are eliminated or nonexistent for some reason, the next of kin would be your first cousins.
These ambiguities over land and assets cause blood feuds and fights among families. During the mourning period, long discussions that do not provide concrete solutions are not what a family needs. So do everyone a favor and write a will.
Furthermore, think of your children. Without the proof of a Will, they will be left at the court’s mercy. And while they will try to do their best for the children’s interests, we all know the system is not perfect. If you or your spouse have an untimely death, then you should have a person in mind who will dutifully serve as a legal guardian to your kids.
Sidestepping the State
Now you’ve read the long list of relatives that we just wrote. If you don’t have any of those (it happens), then your property will most definitely pass to the state if that is what you want. The state will see to that the property as they see fit. Alternatively, you can donate what you’ve gained to a charity or to friends in need. So, this way, you can do one last good deed before you leave this world.
A life insurance policy
Having life insurance as a business owner is of utmost importance. A life insurance policy can ensure that your family continues to receive an income after your death. Additionally, it can be used to fund buy-sell agreements or to keep the business running.
Agreement of purchase and sale
A will also specify who will make decisions in your absence. A buy-sell agreement can be beneficial if you own your business with others. A buy-sell agreement is used in the event of an owner’s death, resignation, or incapacitation. The contract specifies the conditions and the price at which an owner’s share can be acquired.
Considering how your business assets will be handled when you die can lead to fruitful conversations with your family and business partners when setting up a new business. As a result, everyone will be encouraged to consider what will happen to the business, whether they can sell their interest, and how incapacity or death could affect the company.
There is no need to be afraid of having a will. When you pass away, ensure your business and personal affairs are handled according to your wishes.