In our last article we broached the subject of Estate Planning. Many business owners put off thinking about how, and to whom, their business will be passed when they die. While every business owner’s estate plan is unique; here are 7 areas that should be addressed:

1. WILLS AND POWERS OF ATTORNEY: Having a will is particularly important in the case of a business owner. Among its many benefits; in the event of unexpected death, the will can provide the executor with instructions on how to deal with the business, and who will have the power to make decisions. A business owner can use a will to address the issue of equalizing bequests between children who are active in the business and those who are not.


Contact us to help with your succession planning.

Your business is probably the largest asset on the balance sheet, and some business owners are not treating it with the same respect as they might an investment portfolio.

or call 1-800-661-1518


2. SURVIVOR’S BUSINESS PLAN: This type of business plan outlines what steps family members or associates should take to keep the business operating smoothly in the case of death or disability of the owner. That plan is not a legal document but it’s a sort of blueprint for going forward.

3. INSURANCE: Life and disability insurance can be used to meet the immediate income needs of the business owner’s family members in the event of the business owner’s death or disability. In addition, proceeds from insurance can be used to pay for a tax liability associated with any deemed disposition of the business upon death. Without the proceeds from insurance, a large tax liability could force the sale of assets or even endanger the business.

The business owner should acquire “key person” insurance to cover the death or departure of an important person in the business. Key Person protection can produce enough money to be able to pay for things like an executive search or hiring the services of an interim manager, etc., if the key person dies. Without that insurance, you risk getting pressure from creditors, suppliers and shareholders

4. SHAREHOLDER AGREEMENT: A client who is in a business partnership or who owns shares of a business with other individuals should consider drawing up a shareholder or partnership agreement with the other individuals. Such an agreement could set out what would happen in case one of the partners dies, experiences a disability or retires. Shareholder agreements help people avoid fighting later on.

5. ESTATE FREEZE: An estate freeze allows the business owner to take steps to minimize the tax liability to his or her estate on death by transferring future growth in the business to the next generation.

6. TRUSTS: If a business-owner client is uncertain about which of his or her children will be a successor, the client could set up a discretionary trust to be in force until the owner is ready to transfer business ownership to a child.

7. DIVERSIFICATION OF ASSETS: Often, most of a business owner’s wealth is tied up in the business, which represents significant risk to family wealth. Business-owners should be encouraged to build up pools of investment and retirement assets to make them separate from the business. A business owner also could establish a holding company for the purpose of holding assets separate from the business and offering a degree of protection from creditors. However, business owners should consult with a tax expert before establishing a holding company for this purpose.


We Can Help You Prepare With Confidence

It has been our experience that business owners may have developed great entrepreneurial skills, yet have little experience regarding investing or retirement planning. We have the experience to guide them through that and give them confidence about the decisions they’re going to make.

Contact Blair Patton at 1-800-661-1518 ext.1391 or email bpatton@danlawrie.com to discuss Estate Planning.

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