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Estate Planning for Your Business

Wills

We have previously discussed estate planning for your personal property, but what about estate planning for your business? Many people do not realize that having an estate plan in place for your business (to plan for when you pass) is absolutely essential, and this plan should be “living,” i.e. adaptable as circumstances change.

Taxes

Perhaps most importantly, the right estate plan can reduce the duties, fees, and taxes that could significantly cut into your business’ value when it is passed on at your death. One of those taxes is known as the “death tax,” and rages between 35 and 50 percent of the value of your taxable estate in excess of ten million dollars under current law.

There are two tax breaks that minimize the tax burden for smaller businesses and help your beneficiaries cover estate taxes: Section 303 which allows the estate to redeem stock, and Section 6166, which allows small business owners to defer the estate tax under some circumstances and, instead, pay it in installments.

Basic Protections

Some of the basic protections put in place for your business “estate plan” include buy-sell agreements, succession plans, and key person insurance. A buy-sell agreement does a number of things, including:

  • Establishing a contract between partners or shareholders
  • Establishing a plan for the business in case the owner becomes incapacitated or dies
  • Establishing a sale price for the business; and
  • Documenting other important information, such as who can buy shares, have a role in the business, what heirs can and cannot do, etc.

In particular, buy-sell insurance policies should reflect current business values in order to adequately fund the purchase of a deceased partner’s or shareholder’s interest in the business.

The attorney that you work with should maintain open and honest channels of communication in discussing these plans with your heirs/beneficiaries and business partners in order to ensure a smooth transition and future for your business. In addition, if you are a sole proprietor, they will need to make sure that there is a clear plan of action when it comes to the overlap with business and personal assets.

Update Regularly

And, like all good estate plans, the estate plan for your business should be reviewed and updated regularly in order to account for any and all changes, such as those in the law, the changing values of your assets, and changes in your beneficiaries. In addition, there should be a significant amount of overlap between any estate planning and your general financial planning management.

Contact Our Florida Business & Estate Planning Attorneys

The Sarasota wills & probate attorneys of Moran, Sanchy & Associates practice both in business transactions and litigation and estate planning here in Florida. Our attorneys are prepared to offer you the very best in planning for both your estate and business. Contact us today to find out more.

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