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Most entrepreneurs tend to get busy in the process of running their start-ups, large enterprises, and small businesses. As they work hard, they often forget to prepare for instances where they’ll be unable to run their business – instances like accidents, or worse, death. After such a mishap, will their business legacy continue to live on? Who gets to take over, and what are the strategies to ensure the enterprise transcends the test of time?
That’s where an estate plan comes in. Estate planning is the process of preparing and arranging an individual’s properties and assets in the event of their death or incapacitation. Assets, in this case, refer to bank accounts, business dealings, clothing, properties, and most importantly, business ownership.
Most people shy away from discussing estate planning since it’s uncomfortable to think about death and its aftermath. However, it plays an important role in running a successful business. Through an estate plan, the interest of your associates is taken care of. Additionally, the livelihood of your employees and the well-being of your family and loved ones are protected. If you’re big on charity, having an estate plan can help you distribute your properties to charity beneficiaries. Lastly, estate planning allows you to save time and money because your estate will be administered according to your wishes, thereby preventing the court from taking over the administration of your assets.
Nevertheless, a good estate plan should contain important components such as wills, trusts, and beneficiaries. If you’re planning to create or update your estate plan, here are some of the tips you should consider:
1. Have A Trusted Team Of Advisors
When it comes to estate planning, you may need more than one advisor, depending on how big your estate is and its value. At the minimum, it’s recommended that you have an estate attorney, if you don’t have one yet you may look through online sites such as https://blakeharrislaw.com/estate-planning. If your investment portfolio is large, consider hiring a financial advisor. Similarly, adding an insurance expert to your team would come in handy for high-value properties, especially real estate, that may need insurance. Every team member can widen your perspective on significant matters of your estate plan.
While choosing your team of advisors, carefully select a trustee among them. A trustee ensures that all your assets and transfer wishes are executed according to your directives. It’s their goal to see to it that you achieve your succession plans. It’s, therefore, necessary that you thoroughly pick your trustee as part of creating a successful plan.
When choosing a trustee, it’s crucial to consider some personal characteristics. For example, you should pick someone trustworthy, detail-oriented, personable, free from external pressures, and good at handling money. By taking all these things into account, you may be able to make the right choice.
2. Have All The Necessary Documents In Order
The types of documents you need to create a good estate plan will differ from one business to another. It depends on the size and value of the enterprise. However, every entrepreneur looking to map out a successful transfer of wealth will require standard documents, these include:
A Last Will And Testament: This is a written document that allows you to state who should receive your assets after death. Although most people believe a will is all you need for estate planning, it’s not. It has limitations that have led to the introduction of other documents. Some of these limitations include the costs and time incurred by the heir during probate. During this legal proceeding, the executor will pray for the issuance of a Grant of Probate so they can legally perform the administrative and tax duties involved in the administration of the estate. But like other legal proceedings, going through probate means paying probate administration expenses that may be costly to your estate. So, if you’re trying to avoid probate, you might consider other options, such as a trust.
A Living Trust: There are two kinds of trust; a revocable one known as a living trust and an irrevocable one. A living trust is best suited for entrepreneurs’ business transfers, it’s designed for easy transfer of assets. Unlike a will, a living trust allows you to avoid probate. Avoiding probate makes the process of administering your property private. Therefore, consider using a living trust if you want to protect your business properties from the public.
A Succession Plan: A succession plan document lists the new owner, managers, and other executives of the business. Additionally, this document contains important information that would aid in the seamless transition of the new business owner. Such information includes computer passwords, codes, and pins, to mention a few.
Advance Care Directive: This is a written document stating your express wishes for medical and end-of-life care if you become incapacitated to make certain decisions on your own. For example, you can state in the document certain things you’d like to happen for your medical and end-of-life care. These can include the use of feeding tubes and ventilators, administration of a specific medical treatment, and other instructions. On the other hand, an advance care directive is known as a living will because it includes the mention of a specific person authorized to make the decisions for you.
Power Of An Attorney– This is one of the most resourceful documents for estate planning among business owners. When you’re incapacitated, you can simply name an individual whom you want to manage your business with the power of an attorney. However, when you die, the authority of the person will cease to exist.
3. Update Your Estate Plan Regularly
Creating an estate plan is a lifelong process. For instance, if you’re currently running a start-up, it may grow into a large business. Therefore, you would have to revise the plan and update the company’s new value once it grows. Moreover, people’s minds change constantly. That’s why there is a living trust where the original business owner can revoke his or her rights. The same can happen with a will. You may decide to transfer a property to a family member today and change your mind five years from now. So, it only makes sense to update your plan regularly.
Another reason why you need to update your estate plan is due to inflation. For example, suppose today you decide to transfer an asset worth a million to a charitable organization. The asset could gain value in ten years. You may be passing down more than you initially planned. By revising your plan, you can change the transfer. If the asset depreciates, you may consider adding another property so that you can meet the initial value.
Create An Estate Plan Today
As mentioned before, having an estate plan is a lifelong process. The best time to start creating one is today. You can use the tips discussed above to ensure your decisions are informed and your plan is successful.
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