This is the last article in a four part series on business continuity. Catch up on the first article, Will Your Business Survive Without You?, the second article, Succession Planning=Peace of Mind and the third article, You've Built Your Business, Now Build Your Exit Plan.
Most construction business owners will spend a lifetime making sure their businesses succeed. After all of your hard work, do you really want to leave the fate of your business in someone else’s hands? As it is likely your largest asset, you’ll want to ensure your business is protected through a detailed estate plan. This plan should focus on minimizing estate and gift taxes as well as protecting your wealth for your family.
When a business owner dies, the business is considered an asset included in the estate, which encompasses all investment accounts, businesses, property, real estate and life insurance. If the value of an estate exceeds $5.49 million in 2017, it will be subjected to the federal estate tax, often referred to as the “death tax.” Only the amount exceeding the $5.49 million exemption will be taxed, but can still leave heirs scrambling to pay the taxes due within nine months of the owner’s death. The heirs will often sell the business for far less than it is worth to cover the tax bill.
To preserve your business, it’s important to consult an accountant or estate attorney to create a plan that will cover all of your business and personal needs. They will offer advice to help reduce the value of your estate, and in turn, the amount you’ll owe in taxes on your estate.
Creating a proper estate plan is a proactive approach to protecting your business, assets and family. Establishing a will as part of your plan will further protect your family and may help to avoid the probate process, in which a person’s estate is administered through the court system after their death.
When creating a will, you should also appoint a power of attorney to make decisions on your behalf in the event you become incapacitated and are not able to do so. A healthcare directive will allow your power of attorney to execute your medical wishes as you have specified so the burden of making those difficult decisions does not fall on your family.
It’s never too soon to create your plan and should be made a priority by everyone, regardless of age or class. Advanced planning will ensure your plans for your estate are carried out according to your timeline and that your business and loved ones will be taken care of after your death. If you’re ready to secure the fate of your estate, HORNE can help. Contact us if you’d like more information, need to revise your current plan or need help developing a plan.