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5 Estate Planning Essentials

04/28/2023 - Business Insights, Growing Your Business

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WesBanco Business Insights: 5 Estate Planning Essentials for Entrepreneurs

5 Estate Planning Essentials 

You’ve worked hard to make your business a success. So, it’s important to ensure that your business can continue to run smoothly and deliver value to your family, team and customers even if you’re no longer at the helm. That’s where small business estate planning comes in.

Estate Planning for Small Business Owners

Small business estate planning is a task that entrepreneurs often put off in favor of more pressing day-to-day demands, but it’s crucial to create an estate plan that takes your business assets into account. A sound plan will specify how assets will be distributed, who will take over leadership of the business, and – most importantly – how your loved ones will be supported.

Estate planning for small business owners usually requires thorough discussions with financial advisors, lawyers, accountants, colleagues and family members. But you can get started now by thinking over these five estate planning essentials:

1. Write Your Business Will

A well-written business will outlines the wishes of a business owner in the event of their death or illness. Make sure your last business will and testament includes clear and complete instructions for the distribution of your business assets. Name someone you trust to be the executor of your will; they will be responsible for carrying out all your wishes.

You’ll also need to determine who will receive your important documents and business information, such as bank records and login credentials for online accounts. Compile and store this information separately from your business will so it’s not filed publicly in probate court.

2. Draft a Power of Attorney

Designate a reliable person to serve as your agent (or “attorney-in-fact”) should you become incapacitated by accident or illness. In such a circumstance, your agent would be tasked with carrying out your key business responsibilities, such as paying creditors, filing taxes and handling payroll for your staff. Consider your personal and business goals, and then work with an experienced estate attorney to craft a power of attorney that clearly lays out the agent’s obligations and rights.

3. Set Up a Revocable Living Trust 

A last will and testament is a public document that is probated in court. Distributing your business assets through probate court can be a slow and costly process, and it can also expose sensitive information to the public. Consider setting up trusts, such as a revocable living trust or a testamentary trust, to hold your business assets. Trusts can provide flexibility and privacy in the distribution of assets and may also offer tax benefits. For instance, a revocable living trust can be a more efficient and discreet alternative that helps your estate avoid probate and allows a smoother ownership transition for your business. This option lets you manage and update the assets within the trust for as long as you remain the trustee.

4. Establish a Buy-Sell Agreement

If your business has multiple owners, having a buy-sell agreement in place can be helpful in determining how your ownership interest will be distributed in the event of your death. A buy-sell agreement typically outlines terms of sale, such as the price and conditions under which the sale will occur and can help prevent disputes among co-owners or family members. It’s also important in case you declare bankruptcy, go through a divorce or experience another adverse financial event. It’s common for business partners to purchase key person insurance or a life insurance policy for each owner, with the other owner or owners listed as beneficiaries. The payout can then be used to purchase the ownership interest of the deceased owner.

5. Create a Succession Plan 

One of the best ways to support your enterprise’s long-term success is to create a business succession plan that can ensure a seamless transition of leadership. Your plan should specify who will take ownership – a family member, a business partner or an outside buyer – and establish a timeline for this transition. An independent valuation of your business’s tangible and intangible assets is often a critical component of this process. Consult an accredited business appraiser to find out whether you need one. You should also consult your accountant, lawyer and financial advisor.

Small Business Estate Planning Support 

At WesBanco, our business financial advisors can guide you through estate planning for your small business and ensure that you have everything you need to keep things running smoothly. Need more business help? Explore our business services.

View WesBanco’s Business Services

Content is for informational purposes only and is not intended to provide legal or financial advice. The views and opinions expressed do not necessarily represent the views and opinions of WesBanco.

While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified, licensed professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.

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