Business Succession Management - Estate Distribution - Every business owner must realize that estate planning objectives are not the same as lifetime objectives. Death can come surprisingly so plan correctly for the future today.
Business Succession Management - Estate Distribution
By Irving Katz
Dec 1, 2010 - 10:39:58 AM
Every entrepreneur must realize that estate planning objectives aren't the same as lifetime objectives. Death can come suddenly so plan correctly for the future today.
In planning an estate, there are 5 main objectives :
1. The need to provide economic security for the family
2. Preventing the business from becoming a burden to the surviving partner
3. The fair distribution of the estate to the youngsters
4. The avoiding of giving of too much to the children too shortly
5. The minimization of the estate taxes
Taxes, wills, trusts, curators, executors, and so on. Are all important to consider when it comes to estate planning, but there are soft issues that must be planned for too. As an example, the business owner desires to be certain that the work ethic of his kids will not lessen because they have inherited wealth. There are methods to prevent this from happening. Namely, maintain open communication with your kids. Let them know what you're expecting from them after they receive their inheritance. Teach your children to be charitable. Teach your spouse how to be a widow or widower. Make sure that your folks knows what it must about your business and other assets.
Be prepared. Review all executed estate planning documents on a regular basis. If you have special wishes for certain employees, make sure that they are documented and communicated to your folks. Write your special thoughts down to friends so that they may read these thoughts after your death. Run your business in an orderly fashion to avoid unnecessary legal costs upon your death. When you select your estate planning lawyer, choose the right one. You need the attorney to be well informed, but also competent at communicating with your folks when you are no longer here.
Another primary concern is to suggest with your consultants pertaining to how your family will receive income on your death. Obviously, your other half can't just walk into the office and ask your bookkeeper for a check. Decide now what you want to have happen to your business on your death. Should the business be retained, sold or liquidated? Who's going to help your family in carrying out your wishes?
Regarding children, if your plan is to have them succeed you at the business upon your death ; make sure that your estate plan reflects this. When it comes to kids, our mantra is you have got to be fair ; you don't need to be equal. As a case in point, if you have a kid with who is working hard to help grow the business now, that child should have the first shot at running it after death. This kid should not have to take on uninvolved siblings as partners. In reality this is a recipe for disaster. Moreover, you don't have to equalize the youngsters not concerned in your business with other assets. They should get assets besides the business, but they don't have to equal the value of the business. Regularly the kid invested in the operations of the business has - over time - made a contribution to building the business. Therefore , distribute assets reasonably. Remember that your most important concern as a parent is that your youngsters keep having Thanksgiving dinner together when you're no longer here.
Another challenge : frequently folks leave possession to youngsters who aren't actively concerned in the business. There isn't any way that active and inactive siblings are going to have the same agendas. In another common eventuality, we see elders leave the business to the active youngsters and the estate where the business is found to inactive kids. This is also a real mistake. When the con icts inevitably arise between siblings, watch how fast the active youngsters move the business location when the break presents itself. Without a correct estate plan, estate taxes could force the business you have spent an entire life building into liquidation with your survivors making a guess about how you wanted your assets distributed. By creating an estate plan now, you control how things will be after you are gone. In doing so , you protect what you have worked so hard to form. Sit down as fast as possible with a qualified tax attorney and begin the process!
Irving R. Katz, President of Katz Financial LLC, is a Family Business Coach. Irving specializes working with entrepreneurs who are looking for answers to growing and maintaining their enterprises so it remains and sustains the family. He is a professional in Retirement Planning, Wealth Creation, Wealth Retention, Business Succession Planning with Family members, The blueprints For Tomorrow ProgramTM, and Estate planning for his family business owner clients.
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