New Year. New You. Resolve to Plan Better For Your Business

New Year New You written on notebook

It’s time to take control of your finances and business.

Estate and business planning are about taking control of your situation.  You have worked hard to cultivate your business. Now it’s time to make sure it is taken care of by critically thinking about your business’ future.  You cannot ignore estate planning and business planning.  Here is some advice to ensure this process is more comfortable and manageable.

Resolve to Know the Tax Numbers

For 2021, the unified federal estate and gift tax exemption are $11.7 million, or effectively $23.4 million for married couples—the highest amount estate planners haven seen by historical standards. The annual gift exclusion amount will stay at $15,000, meaning you can transfer up to $15,000 per year to any number of individuals without paying gift taxes on the amount.  In 2026, the exemption is set to “sunset” and fall to about $6.4 million, or $12.8 million for married couples, after inflation adjustments.  Currently, there is extreme uncertainty about the future direction of the federal estate and gift tax rules and whether Congress will change the law sooner. Now, the government needs revenue and is looking toward new taxes as a solution. A wealth tax, raising income taxes, or increasing estate tax revenue will likely all be on the table over the next few years.

Resolve to Assemble a Team and Evaluate With all of Your Advisers

Comprehensive estate planning is a team effort.  You should assemble a group of individuals and professionals who will work together to design and implement your legacy goals.  At a minimum, your power team should consist of an estate planning attorney, certified financial planner, business advisor and tax professional, insurance professional, business attorney, and trusted advisors.  The right team can set up your estate from all aspects to ensure taxes are minimized, and growth is maximized.  You should review your estate plan together annually with your entire team to ensure all objectives are met and to retain the integrity of the plan for your accounts and property that you created and designed.

Resolve to Evaluate, Get Basics Together, and Finalize Decisions about the Business’ Future

To ensure your company passes precisely the way you desire, you want to create a comprehensive estate plan for business owners. If you don’t have estate planning in place; default corporate documents, state succession laws, and the probate process will determine where your assets go. Do you want your estate defined by state laws and the court system?  Be proactive, meet with an estate planner and financial planner to set up an end of life and estate plan.

To draft your estate planning documents, you should take the time to think about your decisions. You should answer the following questions: Who should inherit the business? Do your successors want to continue the business? Are all your children interested in inheriting the family business? Is everyone on the same page?  How will the business transition? Do you need to set up a trust or other business entities? Do you need to institute a gifting plan? Where can you find reputable attorneys and advisors?

Resolve to Organize and Update Your Documents

Take some time to organize your business files.  You should not be the only person who knows where your business records are. An estate plan ensures your business and family are protected and have an easier time managing your business and estate plan after your death or disability. Your estate plan documents cannot be static. You will want to periodically review your full estate plan with your attorney, accountants, financial advisors, and any other members of your team. State and federal laws are continually changing. Are your named agents proper fits for the role and able to serve? Do you need a specific business power of attorney? Do your designated agents have the business acumen or financial acumen to address the complexities that may be involved in fulfilling their role? When updating your documents, review the property and assets and distribution plan as well as the people involved. Cautiously consider beneficiaries and others you have entrusted other responsibilities, including the executor of your will, trustee of a trust, power of attorney, and guardian of your children. Your personal situation may change, as well. Set yourself up for success by consistently reviewing your estate plan.

Resolve to Think Long Term

A business owner must provide for both your family and your business.  Evaluate if you have adequate insurance and asset protection, including proper business structures and umbrella policies.  Life insurance is a safety net for your beneficiaries, employees, and clients to provide liquidity for your family and business while your affairs are finalized.

You may also need a different type of insurance policy for your business, known as a “key person” policy, these policies payout when a “key person” in the company dies or is disabled. This money could be precious to survival for your small business.

Resolve to Draft a Business Succession Plan

Suppose you wish to pass control of your company to chosen successors. In that case, you need a succession plan to make sure your beneficiaries know how to run the business or sell the company without you successfully.  Your succession plan should detail the financial and leadership roles, include information about who will step up to lead, and explain exactly how and when the company will be transferred. If your business has multiple owners, you’ll likely need a buy-sell agreement.

In today’s litigious and social climate, a thoughtful and comprehensive estate plan is vital to a family’s future.  Careful planning can help ensure that your death is less stressful for your family and your estate can be settled efficiently and cost-effectively.  Proper estate planning can ensure that your beneficiaries are protected against subsequent lawsuits or divorce.

Estate planning is complex, especially for entrepreneurs. The right team can help you protect your business and your family. Many benefits can be had from proper planning; including peace of mind, financial security, tax benefits, and family harmony that well-maintained planning delivers.

Resolve to tackle these tasks even if you find them unpleasant, expensive, technical and would rather avoid them.

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