The importance of estate planning when starting a new business

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Bringing up the subject of death is not easy for most people. You’re forced to face your mortality and deal with the idea that you won’t be around forever. As challenging as it might be, preparing for when that day arrives can be important, particularly if you are thinking about starting a new business. If you haven’t yet looked into estate planning, here is why now might be the right time to do it.
You can avoid court intervention
After speaking with an estate planning attorney, you may have more of an understanding of how living trusts work. Living trusts are designed to manage your assets, including your family home, investment properties, and business interests.
You are the trustee while you’re alive, but you can also name a trustee to take over when you die. Trusts stop your financial affairs from becoming public in the court system. They can also help your loved ones avoid probate court while having a clear idea of your wishes after death.
You can establish a buy-sell agreement
When you start your own business, estate planning becomes even more critical. Suddenly, people are relying on you for their financial security, including other business owners or people involved in your partnership or corporation.
Consider talking to an estate planning attorney about buy-sell agreements to reduce the risk of business-related problems after your death. These agreements determine what happens if a co-owner dies or leaves the business, including how assets are handled if that were to happen.
Reduce taxes for loved ones
Not only can an estate plan make sure everyone knows your wishes, but it may also allow your family to enjoy a reduced tax burden. If you work with your attorney to set up an intentionally defective grantor trust (IDGT), you may be able to avoid taxes associated with large gifts.
This trust type allows you to isolate your trust assets and separate income tax from estate tax. You will still continue paying income tax, but beneficiaries may not have to pay gift taxation.
Have your business continue without you
Many business owners are kept awake at night by the idea that their business would collapse and fail without them. You might be the only one that understands your business practices, or you may not have put any plans in place to have someone take over the reins.
When you start a new business, consider forming a succession plan. This plan outlines what will happen to ensure your business will continue to operate without you in it. It can include who will take over the company and what that might look like.
For example, you may request that the business be sold on the open market, offered to employees to buy shares in, or handed to a family member to take over daily operations. Without a plan in place, your business may end up in the hands of someone who drives it to bankruptcy, or it might even be sold against your wishes or closed down.
With so much to think about in the early days of a new business, it’s easy to let estate planning fall by the wayside. However, the sooner you think about your family and business’s future after your death, the more peace of mind you can have that you’ve covered all of your bases.