Planning one’s estate is important for many people, but as a small business owner, you have additional reasons to consider undertaking this important step. Those reasons include your responsibility to your employees, business partners, and customers. When a business owner dies without leaving a continuation plan in place, it can be devastating for all of the people who depended on them. An estate plan is one tool that can be used to make sure the company’s assets and the business itself, continue after your passing.
An estate planning lawyer can review your professional circumstances and your desires for how you’d like your company to carry on after your passing. Though estate planning cannot adequately address all of the business concerns of a company, it can help tremendously when it comes to saving your heirs money when it comes to estate taxes. Talk to an estate planner to find out more. Below is some general information about tax issues and other reasons to consider planning your estate sooner rather than later.
Minimize Estate Taxes
Your estate planning lawyer can confirm if this will be true in your case, but an estate tax can be as much as half the value of the business and your heirs might have to pay that within nine months of you passing away. It may require them to sell your business, and depending on their financial situation, it might mean they sell your business for far less than it’s actually worth in order to meet their tax obligation.
One approach to solving this dilemma is to take advantage of existing federal tax breaks (Sections 303 and 6166) which are intended to reduce the tax burden on small business owners. However, there are caveats.
- Your heirs can only use these breaks once.
- For Section 6166, your company’s stock value must be more than 35% of the value of your estate.
- Your estate planning lawyer can tell you if the executor of your estate will be eligible to pay the estate tax annually over 10 years instead of all at once within nine months of your passing.
- Under Section 6166, the first tax payment will not be due for five years.
If you pass away without a will or trust in place, and your business assets are only under your name, then very likely all of your business’s assets will enter the probate process. They are then subject to a judge’s discretion as to what happens to them. Your debtors may lay claim to them in order to recoup their money. Others may also decide to take this step for any number of reasons. Without those assets, your business will likely fail and through no fault of those who stepped up to take your place. This scenario can be avoided with the help of an estate planning lawyer Abingdon, VA residents trust. By placing certain assets in a trust, co-owing the business or assets, and by taking advantage of other estate planning tools, your heirs and survivors minimize the risk of losing everything.
Thank you to our generous contributors at the law office of Mark T. Hurt for the above information.