How Important Is Estate Planning in Business?

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It’s easy to get lost in the thrill and stress of running a business. There’s always the next product, the next trend, and the next business opportunity. Most business owners have great foresight. However, only a few business owners understand the importance of estate planning. If you aren’t familiar with estate planning yet, here’s a good start:

What Is Estate Planning?

Estate planning is a process that organizes the transfer of your assets upon your death to people you choose. This is especially important for business owners, because it’s common for business assets and family assets to be linked to each other.

If you die or become permanently disabled, estate planning will ensure that your assets are distributed to your kin in the manner you want, and it also helps make the transfer of these assets easier. Estate planning is important because of these reasons:

It Protects Your Business

Estate planning is a measure that ensures that your estate is distributed to your next of kin accordingly. This is founded on the assumption that you know your family best and you know which among them is best qualified to handle your business after you. If you fail to designate a beneficiary to your business, the court will do so in your stead.

The problem here is that the court doesn’t know your family the way you do, and therefore, the court cannot truly determine who among your family is the best person to inherit the business. You run the risk of having the business go to a family member who doesn’t know how to run it.

It Helps Your Kin Avoid Inheritance Taxes

Another added benefit of estate planning is that it minimizes the inheritance tax needed to have ownership of the asset transferred to your heirs. This is done by dispersing the taxable properties over a period of time in order to circumvent inheritance taxes. This isn’t tax evasion, but rather a way to encourage testators to distribute their assets while they are alive. This is different from Succession law wherein the stipulations included take effect only after the death of the Testator.

It Prevents Feuds Between Beneficiaries

Another reason why it’s important to plan how your estate is to be distributed is to avoid conflict among family members over your assets. Estate planning clearly defines who gets what and how much. This way, your decisions are final and incontestable. It’s far too common for a family-run business to fail because one of the heirs wanted to claim a bigger part of the business at the expense of other heirs.

This is especially important for businesses that generate a lot of revenue. Remember that the purpose of estate planning is to ensure that your family is financially-secure even after you’re long gone.

You don’t have to be among the richest people on Earth to consider estate planning. It’s highly encouraged that people who have a lot of assets seek help from professionals like the lawyers at the Staubus and Randall law office to help them ensure that their assets are distributed properly and that their business continues to run long after their death. Keep in mind that you never know when you might meet a fatal accident. Don’t wait until you’re old to start planning how you’re going to distribute your assets.