Estate planning generally involves identifying resources, choosing beneficiaries and drafting legally-sound documents. Valuable resources often require more careful consideration than basic personal property.
Business holdings, including professional practices, family businesses and closely-held corporations, may be the most valuable assets an individual owns. Testators creating or updating their estate plans may need to carefully consider their business holdings and their testamentary intentions. Simply including business holdings in a will is not always an optimal solution.
What factors require consideration?
Various details about business holdings may influence the best way to address a company or professional practice in an estate plan. If a close family member, such as a child, pursued the same career and now plays an active role in managing the business, they might inherit the company directly when a parent dies.
Other times, no one in the current owner’s inner circle may have an interest in the company or any experience running it. They may want to transfer ownership of the business to a trust and name their loved ones as beneficiaries. An individual who can manage the company effectively can serve as their trustee.
It is also sometimes possible to separate ownership from management. Business owners can leave the company to their children or other family members while creating a succession plan that helps train their replacement from within the organization. There are many different options for transferring ownership and transitioning to new leadership.
The continuity of business operations, the possibility of estate taxes and the risk of family conflict all make careful estate planning necessary. Choosing the right solution for transferring business holdings is an important step during the estate planning process for many.