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3 approaches to business ownership in your estate plan

On Behalf of | Oct 25, 2021 | Estate Planning |

The bigger an asset is, the more important it becomes to properly address it in your estate plan. Life insurance and real estate are often focal points in people’s wills, but businesses can also be worth hundreds of thousands of dollars or even more.

If you own a successful business, you likely intend to integrate that business into the legacy that you leave for your loved ones. There are numerous ways for you to address your business in your estate plan, any of which could work depending on your personal preferences and family circumstances.

Name a family member as future owner or executive

If you have already decided that one member of your family will be your successor, you may want to include that in your estate plan. However, inheriting the business outright could trigger estate taxes and could also cause a rift in the family if there aren’t similarly valuable assets to leave to other family members.

You may need to temper someone’s ownership by splitting it between them and their siblings who will not work at the company or by making the business their sole inheritance while your other assets go to the remaining members of the family.

Order the liquidation of your ownership interest

You don’t have to arrange for the direct distribution of your assets to others when you die. You also have the option of having the representative of your estate sell off or liquidate your property and distribute the proceeds among your loved ones.

If no one in your family has an affinity for your business, then selling the ownership to someone else after you pass and letting your family members split the proceeds might be a better approach. That way, the company continues to exist, and your loved ones still benefit from your ownership of it.

Give certain family members the first right of refusal

Maybe you think that there is someone in your family who would like to own the company, but you don’t want to offer the business outright to anyone in your estate plan. It may be a better decision to offer the first right of refusal to purchase the members of your family.

That way, the rest of the family can still benefit from its overall value even if one person ends up owning and running the business. If someone really wants to take over, they can secure financing and make a fair market value offer on the property, which may make them more committed to its success in the long run.

Considering your family relationships can help you create a proper estate plan for your unique needs as a business owner.

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