While there are countless big companies out there with shareholders and boards of directors, there are far more small, family-run businesses run by a sole owner and a few support staff.
It’s not uncommon for family members to heavily rely on the continued success of their business to keep them afloat. The untimely death of an owner may put a family’s means of support on the line. However, a business succession plan can minimize the chances of this happening.
Reduce your tax burden
One of your executor’s responsibilities is to settle your estate. Filing your final tax return is part of that process. You can potentially minimize the taxes that you owe and any additional taxes incurred during the probate process by having a business succession plan.
Seamlessly pass your ownership stake to your business partners
Many business owners’ family members know very little about the companies that their loved ones own. It’s not uncommon for Florida owners to sign buy-sell agreements as part of the business succession planning process. Your partners may be able to more easily purchase your ownership stake in the company by entering into a buy-sell agreement with your heirs.
Any business partners who don’t have cash liquidity to purchase a deceased owner’s ownership stake in the company may tap into an irrevocable life insurance trust (ILIT) or even a life insurance policy to cover any necessary costs.
What are the benefits associated with using ILITs?
You can generally avoid the probate process by using an ILIT, freeing up money to pay any estate administration costs that may arise. You can then transfer business assets through the grantor retained unitrust (GRUT) or grantor retained annuity trust (GRAT) process, both of which are tax-savings options.
How to set up a business succession plan
There are a lot of complexities associated with owning a Florida business. One of those is determining what you want to happen once you pass away. An estate planning attorney here in Crestview can go over your options and help you understand the pros and cons of each.
