Estate Planning for the Self-Employed

You know where you want your business to be in the next five, 10, or even 20 years. But let’s take it even further: Do you know where will your business be in 50 years?

With age comes a sense of obligation—ah, maturity and wisdom: the fruits of life’s labor! So, you may be planning ways to protect your loved ones after you pass away by asking questions like: Will my significant other automatically inherit all my assets? Who will look after my children? Does my house get passed down to my parents? All these important questions (and more!) could be easily resolved by starting your Estate Plan.

But wait! Have you thought about what happens to your business after you pass away? Think about it: Your business is your baby. You wouldn’t leave your real baby’s life up to fate. Would you do the same to your business?

You “raised” your small business from the ground up: committing your money, time, and energy to help it mature and grow into a full-fledged company; being a disciplinarian when appropriate, abiding by Corporate Compliance laws; and unconditionally loving and caring for it since the day you incorporated. It was truly love at first sight, wasn’t it?

Without an Estate Plan, your estate and/or business may: (1) owe more taxes, (2) go through the probate process, which include attorneys, legal fees, court costs, and public access to information since probate is a public process, and (3) not have an assigned successor for your business.

So how can you avoid these risks?

Well, first, every Estate Plan should have a Last Will and Testament. In it, you’ll resolve certain issues—like guardianship for your children. As for distributing your assets you can make a choice between a Will or a Trust. Wills are easier to create, modify, and update. Though Trusts are generally more costly and time-consuming, they allow your beneficiaries to skip the probate process and receive all the assets immediately upon your death. But as always, it’s best to Ask a Lawyer to figure out exactly what’s right for you.

It’s important that your business’s succession plan is clearly outlined in these documents, including vital business information such as bank accounts, client contacts, and outstanding debt. Be sure to provide instructions on how to run the business and even how to sell it, all without your help. Set your successor up for success! After all, they’ll be taking care of your baby.

Now, let’s ask this again: Where do you see your business in 50 years? Hopefully, still thriving—and kicking butt!

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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