If you fail to create a business succession plan, when you die your business becomes part of your probate estate. Your business can lose significant value during the time it takes to probate your estate. Your heirs may fight over who gets the business if it is not spelled out in your estate plan. Someone you do not intend may end up inheriting the business and that person may not be properly suited to run the business. As you can see, all business owners need both a business succession plan in conjunction with a good personal estate plan.
Often the business succession plan will include a buy-sell agreement. This is a contract between all co-owners of the business that addresses a variety of triggering events, such as death of an owner and incapacity of an owner. It spells out that when these triggering events occur, the ownership interest of that person is conveyed according to the terms of the agreement, rather than going into a probate estate. The business will often repurchase this equity using the death benefit from a life insurance policy. All of these components must be thoroughly discussed among the owners, a plan executed and if needed, life insurance policies put in place.
In addition to all the business succession planning, each co-owner needs to execute a personal estate plan that complements the business succession plan. There are many different strategies and approaches that can be taken and an estate planning attorney can look at your situation and create the best option for you.
Taking the time to build a successful business requires ensuring that it is protected from certain uncontrollable situations such as the death of an owner. This protection is afforded through executing both a business succession plan which may include a buy-sell agreement and personal estate planning of all co-owners. To get started on protecting your business, contact the estate planning attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
