We all want to do the best for our family, and those we care about, after we die.  If you’ve invested a lifetime of hard work in setting up and successfully running a family business then you are likely to feel some concern about what will happen to the business too.

You may want the business to be handed over to the next generation or, if it must be wound down, that it is done so in such a way that it delivers maximum benefit and minimum stress to both family members and employees.  Proper business transition planning will ensure that things happen as you wish them to after your death as well as after your retirement.

It’s very critical to get good advice on estate planning, or things may not run as smoothly as you would wish. Estate tax and capital gains tax alone could have a devastating impact!

1. Have an estate plan.

An estate plan means much more than leaving a will. For instance in addition to a will it could include a power of attorney, a living will, and a trust. In addition to these testamentary items it is important to properly consider the practical needs and succession planning of the business as well as the needs of the family members.

Avoiding state taxes is very important but it isn’t the only considerations; tax planning is essential but an overemphasis on it could result in strategies which are less than optimal.

2. Consider the size of your estate.

Many people do a back of envelope calculation and decide that their estate simply isn’t large enough to bother with estate planning. The problem with this approach is that dying intestate (without a will) can create considerable difficulties and result in great deal of distress for family members and many difficulties regarding the succession of the family business.

3. Don’t presume you’re too young and healthy to make an estate plan.

You might consider that you are too young and health to make and estate plan, but that may not be the case. Things don’t always go the way we hope, and there’s always the possibility you could be left unable to communicate or properly run the business. Without a Power of Attorney or a Living Will who will decide on your treatment? Would their wishes coincide with yours?

4. Surprises are nice for Christmas…but not for estate planning.

When you build an estate plan, you’ll want to share it with all those critical to the business so they know your intentions well in advance. Your family should be aware – even if there’s the chance that there could be some hard feelings there. At least you have a chance to smooth the feathers now and start planning for the future.

5. Don’t damage people’s lives by leaving them too much

You might think that you would like to leave a fortune to your loved ones, but doing so can be fraught with dangers. Rather than enhancing their lives it could have a detrimental effect on them. Often it is far better to use a trust fund so that the money can be passed over in the long term and in ways that are subject to your wishes; we can guide you accordingly.

6. Consider your estate planning and taxation

Of course you knew we’d come round to this! At Henry H. Jones, CPA, we’re always helping you think about the tax effects.  Without good advice your estate will almost certainly be hit with unnecessary taxes. The further you can plan ahead on this the better. Another benefit of a trust is that it can be used to reduce taxes and to distribute assets prior to probate and without delay.

7. Review your estate plan regularly.

An estate plan is not something that is simply drawn up once and then set in stone. As your advisors, Henry H. Jones CPA would recommend that you review it regularly and modify it according to changes to your personal and financial circumstances.  Laws, and especially laws on taxation, change too, so your plan needs to keep up to speed.

Final thoughts on estate planning…

Estate planning for a family business is always going to be a complex issue and the perfect estate plan might be difficult to achieve, but it is important to develop one that addresses the real needs of the business and the family rather than one that simply involves human emotions and good intentions. It is also important that it includes a living will.

Let’s talk about how you can avoid the many estate planning pitfalls, and get you some rest of mind for whatever happens in the future.