Estate Planning and Why It's Important for Entrepreneurs

No one likes to think about their own death. It's the topic everyone wants to avoid. However, it's inevitable, and it helps to plan for when we're no longer here, especially as an entrepreneur. Entrepreneurs and business owners must set up wills that define the future of their businesses and estates just like everyone else.

Businesses have assets, debts, investments, and employer obligations (salaries and retirement funds). Someone has to handle these responsibilities when you're no longer here.

Without an estate or business succession plan, you leave your family with the challenging burden of figuring the business's future and how to administer other assets. Not to mention the fact that creditors may come calling, and someone has to deal with them.

However, it's not just your family that will be involved in this tussle; business partners and managers who have stakes in the company would also want to know the plans for the business' succession. Who takes over at the helm, or should the business be put up for sale? These questions are crucial, and it helps to answer them through a defined estate plan while you're still alive.

Succession Planning – What It Is, and Why You Need One

Succession planning involves strategies that define how a business passes down leadership when an executive moves on to new ventures, retires, or passes away. It ensures that companies can keep running efficiently without hindrances when those at the helm exit their positions or pass on.

In other words, a succession plan defines the future of your business when you're no longer around. Interestingly, 75% of small businesses don't have a succession plan. Without a well-defined succession plan, these businesses faces an uncertain future when the owners pass on. You will need to work with an experienced business attorney to partner with to create a business succession plan for your company.

That said, your succession strategy and estate plan aren't mutually exclusive. They actually complement each other. Your business forms a significant portion of your assets. As such, your succession strategy should be a core part of your plans to administer your estate, especially if you run a family business.

Estate Planning to Protect Your Personal Assets

Your estate plan should involve strategies that define your business' succession and the administration of your personal assets. Ideally, there are some crucial processes to undergo while drafting your wheel, such as:

● Asset inventory

You'll need to take stock of all your assets, including retirement accounts and investments. List out any personal possessions you also intend to pass on. You should include these properties in your letter of intent to inform your family how to divide them.

● Compile the Necessary Documents

Estate planning documents define your assets and investments alongside your wishes on how to divide them. Some crucial documents you'll need to compile include:

● Will/Testament

● Power of Attorney

● Letter of intent

● Guardianship designations

● Beneficiary designations

● Healthcare Power of Attorney

You'll require professional assistance, such as an estate planning attorney, to help you prepare these documents. A well-defined estate plan can help avoid conflicts and needless family tussles over your estate when you're no longer alive.

Conclusion

Estate and succession planning are crucial processes to help entrepreneurs protect the future of their businesses and assets when they've passed on.

They're not mutually exclusive entities; your estate plan should define your company's succession and the administration of your personal assets.

Documenting your wishes clearly when you're still alive can help prevent unnecessary family and corporate tussles, preserve your legacy, and ensure your business continues to run smoothly in your absence.