As a business owner, you may wonder if you need an estate plan in place. The answer is definitely yes – an estate plan can protect you, your family, and your business should anything happen to you. Your estate plan should address how your death, disability, divorce, or other change in life circumstances could affect your business.
Why Every Business Owner Needs an Estate Plan
When you own a business, a big change in your life could substantially affect business operations. You might get injured in an accident, receive a medical diagnosis, file for divorce, or even pass away. These changes could affect your personal situation and your business’s operations.
From a personal perspective, you may need help from someone else to make financial or medical decisions. Or your property may be divided up between you and your spouse by a judge, with little input on your part. If you die, your estate (including your share of the business) will pass to your heirs.
From a business perspective, your business’s operating agreement may allow the other partners to buy your share of the business if you become disabled or get a divorce. The agreement may have provisions for what to do if a partner dies. If the agreement is silent, then state default rules will apply. All of these provisions in your agreement and the law may lead to a result that is not what you and your partners intended. Estate planning can help you realize the impact that a life change would have on your business.
When thinking about an estate plan, you should account for those provisions in your business agreement, as well as your own wishes. For example, you may want your children to take over the business if you cannot run it anymore. Do both your estate plan and your operating agreement reflect those wishes, and do your business partners agree? If not, then you need to make some changes. Estate planning allows you the opportunity to reflect on what you want and how to achieve it using legal documents.
Estate Planning Documents to Help Business Owners
A variety of estate planning documents commonly used in Texas can help business owners organize their wishes. For example, many business owners want a financial or medical power of attorney. A power of attorney is a legally binding document that gives someone else the authority to conduct your financial or medical affairs for you. The designated person can make decisions on your behalf, such as managing your bank accounts or telling doctors which treatments to pursue. You can limit the power of attorney’s scope in the document by specifying how long it will last and which decisions your designated agent can make for you. For business owners, a financial power of attorney in particular can give them peace of mind that their business will keep running if they are ill or unavailable.
Other helpful estate planning devices include wills and trusts. A will specifies who will receive your property (including your share of a business) if you pass away. If you want to pass on the business to your family, you can use a will to convey it. If you do not want your family to inherit the business, you can leave it to someone else. You also have the option of structuring your business’s operating agreement to reflect how your ownership share will transfer upon death.
Trusts are another option for estate planning. They allow you to contribute assets or money to a trust, and a trustee oversees the assets for the benefit of your chosen beneficiary. Business owners may benefit from using a trust for tax purposes and other reasons.
Because there are so many options for estate planning, business owners should contact a trustworthy estate planning lawyer for assistance. Your lawyer can work with you to develop a plan that addresses your goals and takes your business ownership into account.
Estate Planning Needs? Let Us Help
As experienced Houston business and estate planning lawyers, we help our clients do comprehensive future planning that takes into account their personal and business goals. To best advise our clients, we use our knowledge and experience of both estate planning law and business law. Henke & Williams’ lawyers can review your unique situation during your consultation. Schedule a consultation by calling 713-940-4500 or using our convenient Contact Form.