Estate Planning And Your Business
When it comes to estate planning, people often give a lot of thought to their personal affairs—what will go where, and to whom, and how their personal property will be managed. But what about your business? There are a lot of estate issues when it comes to your business, and how it will go on when you are no longer around. This is especially important if you have a viable, income producing business that you intend to leave to your kids or family members.
Getting Documents in Order
The first thing you need to be certain of is to make sure that your corporate documents are “in line” with your estate documents. In other words, you may say that the business (or your interest in it) will pass on to a family member. But if the corporate documents don’t say that, you may have a problem, and the corporate documents could govern your estate planning documents.
For example, if you leave your shares in your company to a relative, many shareholders agreements include buyout provisions, where the other shareholders can pay the new member (your relative, here), and force the new member to sell the shares back to the company.
If you want to avoid that, that means that you will have to both take that payment (buyout money) into account in your estate documents, and, if you don’t want the company to have that buy out option, you will have to amend the corporate documents accordingly.
What About Control?
You may have ownership, control, oversight and decision-making authority in your company while you are around.
But if you only leave “your shares” or “your interest” in the business to a relative, that may not also include the ability to run or operate the business. Again, your beneficiaries’ ability to run the business is something your corporate documents need to address, so they are in line with your estate wishes.
Policies and Procedures
Your business’ policies and procedures may sound like a business law matter, not estate law. But if you are leaving your business or your interest in it to a relative, is there something to ensure a smooth succession of the business to your relative? Making sure that your business has policies and procedures, can ensure that your relatives will be able to run and manage the business that you pass down to them.
Have you looked at your business contracts? Many contracts could consider your passing to be a default in the agreement. That means that when your relative inherits the business, he or she could be left owing a lot of money, through no fault of their own (or yours). Now would be a good time to make sure that your contracts don’t have a default provision on your passing.
Call the Torrance estate planning attorneys at Samuel Ford Law today for help making sure your assets go where you want them to go when you are gone.