One of the most compelling reasons to discuss your unique situation with an estate planning attorney is the simple fact that there are many different approaches to planning. As a layperson, there is no reason why you would or should be aware of all of them.
However, in just about all instances, there are good solutions, even if the situation seems challenging.
Estate planning for small business owners can fit into this category, and we will look at a couple of different scenarios that are relatively common in this blog post.
Family Business Succession
The best way to explain inheritance balancing for family business owners is to use a simple example. Let’s say that you are a restaurant owner, and you have a son and a daughter. Your son was always interested in the business, and he studied hotel and restaurant management after high school.
His intention was to help you run the family restaurant after graduation, and he has done that quite effectively for years. Your daughter was never interested in this particular field of endeavor. She became a teacher, and she has made a life for herself in another city.
When you are planning your estate, you are faced with a confusing prospect. You definitely want to leave the business to your son, but you want your daughter to receive an equal inheritance. The restaurant is by far your most valuable investment, and you don’t want to split up ownership shares.
Under these circumstances, you could use business profits to pay the premiums on an insurance policy on your life that is equal to the value of the business. In this manner, when the time comes, your son would assume ownership of the restaurant, and your daughter would not be left out or shorted.
Another planning strategy for small businesses also uses life insurance to simplify things, and it is used by business partners.
Once again, we will use a set of hypothetical circumstances to help you understand how this works. We will assume that you have one partner in a small business, and it has done very well over the years. Both of you want to develop estate planning strategies that will allow the survivor to continue to run the business independently.
To accomplish this goal, you could agree upon the value of a business share. Each partner could then take out a life insurance policy on the other that is equal to the value of a share. After the death of one partner, the other individual would collect the proceeds from the insurance company.
The money would be used to buy the portion of the business that was owned by the deceased partner from his or her family. In this manner, the surviving family members could spread the liquidity around in accordance with the wishes of the decedent. On the other end of the arrangement, the surviving partner would assume total ownership of the business.
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As you can see, when you consult with a licensed attorney, you may be pleasantly surprised to find options to effectively plan your estate. These are just a couple of the many different situations that can be effectively addressed through the implementation of the appropriate techniques.
Personalized attention is the key to a properly constructed estate plan, and this is exactly what you receive when you work with our firm. If you are ready to get started, we can be reached in North Carolina at 704-944-3245 (Charlotte, NC and Huntersville, NC), and our number in Kentucky is 606-324-5516 for Ashland, KY, or 859-372-6655 for Florence, KY.
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