One of the most important things to do is prepare for what will happen to your business or personal assets after your death or after you retire. If you fail to take any action, the results could be devastating for your heirs. A plan helps you define how to handle your affairs and provides a roadmap for the successful continuation of your business. While some people use the terms interchangeably, an estate plan and a business succession plan are two different things. An experienced attorney will help you select and implement the planning vehicles that are best for your situation.
An estate plan provides for how a person’s assets and property will be distributed after their death. The advance plan allows someone to instruct how to handle their affairs after they die or if they become incapacitated. An estate plan typically includes a variety of components, such as a last will and testament, living will, trust, and power of attorney. The plan names beneficiaries as well as a person to oversee the probate process. An estate plan is a comprehensive option that is designed for personal property and assets.
Business Succession Plan
A succession plan is a plan that gives instructions for what happens to a business after an owner retires or leaves the business. Although the plan is necessary when an owner passes away, it is particularly important when someone retires. With more people planning to retire earlier in life, this type of plan is needed for every business. It is also needed in addition to a person’s estate plan in cases where someone owns a family business, such as a farm. The succession plan defines aspects of how the business will continue and who will continue ownership and operation.
What to Include in a Succession Plan
There are several important matters that you should address in a succession plan. Some of these include:
- Appoint a successor
- Strategy for succession
- If the business is to close, include a plan for selling the business
- Buy-sell agreement
- Life insurance
- Valuation of the business
The succession plan is critical for every business owner. Other owners or shareholders need to know what to expect and how to handle the many issues that arise when someone leaves the company. Everyone needs to understand how the business will continue, and the plan helps ensure that the company will not suffer financially when a key party leaves. In the case of a family farm, the succession plan is essential so that family members know their roles in case the owner passes away.
Every company must have a plan in place to define the overall goals of the business. This includes a legal plan for how business ownership passes to others when someone leaves. Without a succession plan, a business could find itself with serious financial concerns and uncertainty about the future of the company. A succession plan works in concert with an estate plan to ensure that tax issues and other concerns are properly addressed in the best interest of everyone.
A succession plan is a necessary part of every business owner’s estate plan, yet it can be complex. To learn more about succession planning, contact our knowledgeable lawyers at Moen Sheehan Meyer, Ltd, at (608) 784-8310 or online.