Estate Planning Basics for the Family Owned Business
Few things in life can bring more joy and satisfaction than owning a business. It can provide flexibility, autonomy, and a great income for generations. Successful family-owned businesses often are handed down to children and grandchildren, creating legacies as well as wealth. But business owners face more complex questions when preparing their final affairs. Unlike most Americans, small business owners have added concerns about who will take over the business, how the business will be run after they are gone, and what would happen to the business if they became incapacitated in some way. These and more are issues that an experienced business and estate planning attorney can often help to answer. Here are some basics all family business owners should consider when planning their estates.
A Will is Rarely Enough
If you die without a will in Florida, the state’s intestate succession statute will determine who gets your assets and in what distributive shares. A will tells the world (and more importantly, the courts) how you want your life’s earnings, assets, and liabilities dealt with at death. This is crucial to ensuring your wishes are carried out upon your passing. However, a will is quite limited in what it can do. A will does not continue to have much effect after your assets are distributed. Once this is over, you have no control over what the recipients do with their inheritances. Have a son who becomes a drug addict a decade after your death and after you left him the sole interest in your small business? Well, that business may well be gone now. Have a grandchild who later acquires gambling debts? The money you left that grandchild is likely now in the hands of the casino. The point is, a will cannot control what happens for years to come. This is where a trust can be beneficial.
Trusts for Small Businesses
Families with small businesses may do well to establish a family trust. In this type of document, you can set forth some of these things:
- What happens to a business interest upon marriage or divorce of a beneficiary
- How business earnings are distributed
- When and if someone can lose their interest in a business due to debts or other concerns that could potentially harm the business
- How payments will be made to heirs and non-related individuals or charities
A trust can also have provisions that are triggered by incapacity. This means the person making the trust can set forth rules for how a business might need to be run while he or she is incapable of doing so, whether due to physical infirmity or mental capacity issues, such as dementia or other memory-related diseases. Having this ability can give a small business owner a lot of peace of mind and a sense that things will continue to operate as expected after death. More importantly, it is a terrific way to protect those who depend on the business for income and support, such as spouses, children, and other extended family.If you and your family have a Florida small business and need to discuss your financial future and final estate plan, call or visit us online to speak with an attorney from the Sejour-Gustave Law Firm, PLLC.