Estate and Advance Care Planning for Business Owners

Updated

As a business owner, you already have so much on your plate. You have to juggle managing your business, considering future risks, and even balancing time with your family. What about estate and advance care planning for business owners?

Your business doesn’t exist in a vacuum. It’s affected by your health, wellness, planning, and those it supports. Your estate and advance care plan is a way to anticipate the transitions your company might face if you’re no longer able to lead. 

Jump ahead to these sections:

If you don’t take any planning action, you leave a lot up to chance. While it can be scary to think about the what-ifs involving your own health and future, here’s what you need to know about estate and advance care planning for business owners. Whether you’re a business owner yourself or you’re helping a loved one, this attorney-backed advice is a must. 

Why Is Estate Planning and Advance Care Planning Important for Business Owners?

First, failure to create an estate or advance care plan can negatively impact your business and the people it supports. A business that you worked a lifetime to create might end up shutting its doors due to a lack of succession or transition plan.

Like all things in life, you need a plan. What happens if you leave your business temporarily, indefinitely, or forever? It’s those left behind who are left with the burden of picking up the pieces. As a leader, you can create a plan with your own estate and advance care to ensure things transition smoothly no matter what the future brings. 

Similarly, estate planning has practical purposes for business owners as well. For example, you can minimize the amount your estate will owe in taxes. You also might want to take action to buy-sell your business to the right entity.

Estate and Advance Care Planning Considerations for Business Owners

As you create your estate and advance care plan, consult your business’s legal documents to make sure they don’t conflict with each other. Your plan will be shaped by the type of business you have. For example, the owner of a sole proprietorship has much more control and independence than someone who owns a business with one or more partners. 

A sole proprietorship will stop running and cease to exist without a succession plan. Consider whether you want your business to continue after you are gone and whether your loved ones need it for financial support. On the other hand, a family-run enterprise might have heirs involved with the business who divide assets based on contribution level. 

Above all, communicate openly about your succession plan as a business owner. How do you want your business to run when you’re gone? Who do you want to control leadership decisions, and how should assets be divided? 

Buy-sell agreement

If you’re a business with multiple owners, draft what’s known as a buy-sell agreement. This allows the following to happen, depending on your plan:

  • Partners: Your business partners can purchase any of your interest in the business.
  • Heirs: Your heirs can also inherit your share of your business in your legal will
  • Sold: In some cases, your interests in your business can be sold to a third-party person or company. 
  • Prevent selling: Finally, you can also prevent selling your interest to a third-party.

 

 

Life and liability insurance

Another consideration is life insurance and liability insurance. If you don’t have enough of either of these, your business is at risk if you’re unable to pay expenses through your estate when you die. 

In most cases, you want to have enough life insurance in your policy to have the liquidity to finalize all of your business affairs. Similarly, liability insurance protects your business in case there’s a lawsuit or other concern even after your death or you’ve exited the company. 

Proper recordkeeping

Lastly, you should always have a clear protocol for business recordkeeping. Your estate and advance care plan is only as strong as the paper it’s written on. If it can’t be found, you might as well have no plan at all. 

Keep your will, estate plan, and other documents with your attorney or someone you trust. You can create a free sharing account with Cake to determine who has access to your most important documents. 

Estate and Advance Care Planning Checklist for Business Owners

As a business owner, here’s what belongs on your estate and advance care planning checklist. Remember, talk to an attorney in your state to answer any specific questions. 

Healthcare and medical

  • Healthcare Power of Attorney
  • Living Will
  • POLST or MOLST
  • Designation of Guardian
  • Organ or Tissue Donation
  • Medical Information

Financial and legal

  • Long-Term Health Resources
  • Durable Financial Power of Attorney
  • A Will or Trust
  • Buy-Sell Agreements
  • Business Succession Plan
  • Location of Documents
  • Contact Information
  • Assets and Debts
  • Dependents

Digital legacy

  • Email accounts
  • Digital Account Access
  • Photos and Files
  • Social Media Accounts
  • Digital Assets
  • Create an Inventory
  • Delete Unused Accounts

Legacy items

  • Physical Marker
  • Messages and Stories
  • Defining Characteristics
  • Death Anniversary Wishes
  • Obituary or Death Notice

Funeral plan

  • Funeral Details
  • Burial, Cremation, or Donation
  • Casket or Urn
  • Funeral Gifts
  • Location
  • Funeral Mood
  • Planners and Speakers
  • Payment Arrangements

Frequently Asked Questions: Estate and Advance Care Planning for Business Owners

When it comes to estate and advance care planning for business owners, here are the most frequently asked questions. It’s normal to have concerns when starting this process. Take your time and figure things out at the pace that’s right for you.

How can you talk to a loved one who’s a business owner about estate and advance care planning?

If you’re in a business partnership, encourage your partners to make estate and advance care plans to protect the business and its smooth, continuous operation. Some business partnership agreements specifically address estate planning requirements for co-owners, so reference this if necessary. 

The succession of family-owned businesses can be especially fraught. If you need an ice-breaker to bring up these issues with your own family, you can reference a number of high-profile cases turned sour like the Denver Broncos. Family-owned businesses often support many branches of a family. The risk of leaving your family’s livelihood at risk is worth starting an uncomfortable conversation with the older generation.

How do you find an attorney specializing in estate planning for business owners?

As you search for estate planning or probate attorneys, narrow your search to those who advertise a niche in business law. Business owners may also want to consult with a tax attorney to minimize taxes due upon the transfer of the business. Many mid-to-large probate firms employ an in-house tax law specialist.

If you worked with an attorney to establish your business documents and felt good about that experience, ask them for their recommendation or if they also do estate planning. Similarly, your accountant might be able to recommend someone knowledgeable about your type of business.

Prepare Your Business for the Future

In a perfect world, you’d successfully lead your business forever. In reality, you need to plan for the uncertainty of tomorrow. This means creating a course of action in case you’re unable to operate your business for some reason or you need to exit your company. 

Luckily, these estate and advance care concerns don’t have to be complicated. Whether you work with an attorney or handle things on your own, the only wrong step is to take no action at all. 

Icons sourced from FlatIcon.