Your most valuable assets will probably receive the most careful planning when you think about your estate and your legacy. People put a lot of effort into how they allocate their homes, their investment accounts and their other significant property in their last wills and other estate planning documents.
When you own a small business, you have to consider the company in addition to your personal property when creating your estate plan. There are multiple different ways for you to address your business in your estate planning documents.
Instruct the executor to sell the business
If no one in your family has expressed an interest in running the company, then you may want to instruct your executor to sell the company upon your death. That way, the business can remain operational, providing stability for your workers, and your loved ones get to benefit from the financial value of the company.
If someone in your family has expressed interest in the business but has yet to take on an active role, you might include a clause requiring that the executor offer that individual the first right of refusal for the business. They will have the opportunity to purchase it at fair market value before anyone else can.
Leave the business to someone you trust in your family
Perhaps your middle child has served as the second-in-command at the company for years. Maybe your youngest child currently has an outside job but has told you they will take over the business when the time for your retirement comes.
When you are the sole owner of a company, you have the option of passing it directly to a specific family member as their inheritance. You can even pass it to multiple family members in the hopes that they will cooperate to run the business jointly.
Take steps to separate ownership and managerial roles
Perhaps one of your children has experience with big-picture operations, while another already has hands-on experience with your staff. You might want to restructure the company as you plan your estate.
While you may serve as the sole owner and operator, creating a system of checks and balances so that multiple family members can play an active role as co-owners and as managers could be the best way to pass the business along in a large family.
Knowing your family’s wishes and the demands of your business will make it easier for you to create an estate plan that balances the name of the company with the inheritance you want to leave the people you love.