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Home » How Strategic Business Planning Impacts Your Estate Plan

How Strategic Business Planning Impacts Your Estate Plan

October 18, 2016Estate Planning

Is your business planning aligned with the goals of your estate plan? If not, you could be leaving your estate vulnerable to a whole host of problems.

For many individuals, estate planning tends to focus on just a few central concerns. Many people are looking for a way to provide an easy transfer of assets when they die, a reduction in tax obligations, and protection to provide continuity of decision-making in case they ever find themselves incapacitated for any reason. To deal with these concerns, estate plans rely on a variety of different tools like wills, trusts, and powers of attorney. However, those plans can be disrupted if your business assets aren’t properly accounted for, or if your business planning is not properly aligned with your estate plan goals.

Your business will hopefully continue to grow throughout your life, providing you and your family with additional wealth and financial security. If you’re fortunate enough, you’ll manage to create enough wealth that you’ll have something substantial to leave behind for your heirs when you eventually pass on. That additional wealth can translate into some major headaches, though, if your business planning isn’t tailored to complement your estate planning. Ultimately, the value of your business could have dramatic effects on the size of your estate, and whether or not it ends up being subject to certain tax obligations. There could also be issues surrounding succession, probate, and other important matters.

With effective business planning, you can prevent those issues from disrupting your estate plan, and make your comprehensive planning even more effective. Here are a number of key examples demonstrating how you can realize the most benefit from your business planning efforts.

Minimizing Taxes

Tax concerns are always an issue with estates that have any sort of substantial assets, and that is certainly true where business owners are concerned. In many instances, these businesspeople often have little understanding about just how valuable their companies really are. Unfortunately, the business owner who fails to take his business interests into consideration during the estate planning process may be leaving behind an estate with far greater tax liability than he might have ever dreamed possible.

The main problem many people face is that their businesses grow and increase in value after they’ve concluded their initial estate planning efforts. If your business planning isn’t designed to reevaluate your company’s impact on your estate plan on a periodic basis, then you could soon find that your company’s growth disrupts your carefully-constructed estate planning strategy. If you enjoy enough success, you could even leave your estate subject to estate tax implications – or increase that tax liability if the value of the rest of your estate is already high enough to trigger the tax.

There are a variety of planning tools that can help you to deal with tax implications. You could rely on an ILIT to provide the cash your heirs will need to pay any estate taxes. Alternatively, you could use a grantor retained annuity trust to turn your business assets over to your heirs while still retaining an income during your remaining years of life. You could even just form a family limited partnership and allow that entity to control the assets to remove their value from your estate.

Avoiding Probate

If your estate planning is at least partially motivated by a desire to avoid the probate process, then it is important to ensure that your business avoids it too. If you are a solo entrepreneur, then when you die your assets could be subject to a court-supervised process that can take as long as a year to resolve. To avoid that time-consuming process and the costs that comes with it, you can take some affirmative steps to ensure that the business and its assets are transferred to heirs automatically. Trusts can accomplish that goal, of course, but you can also organize your company as a Limited Liability Company (LLC) and achieve the same outcome.

Business Succession

Even business owners don’t live forever. Eventually, we all die – and when we do, we need a way to ensure that our business interests are passed on to our heirs. The best way to do that is to create some sort of succession plan that provides for ownership and management of your business to be passed on to someone else when you pass away. Your business succession plan should include provisions that ensure that your family is cared for properly, and outline other key concerns that may need to be addressed during any transfer of ownership.

Buy-sell agreements can be particularly effective tools when it comes to succession. They can allow you to have a greater say in who gets to buy interest in your company. When more than one owner is involved in the company, these agreements help to ensure that the buying price is fair, and that surviving owners are not forced to coexist with their partners’ heirs.

Get Started Today

When your business planning is done right, you can more effectively rely on the fact that your estate planning effort can achieve your long-term goals. Obviously, however, these are not issues that you should ever take lightly. Complex legal concerns always require sound legal solutions of the sort that you can only get with an experienced estate planning and business planning attorney. At Frank & Kraft, Attorneys at Law, our estate and business planning experts can help you to craft the strategies you need to facilitate all your estate planning goals. Give us a call at (317) 684-1100 today or contact us online to learn more about how our solutions can help you meet your planning objectives.

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Paul A. Kraft, Estate Planning Attorney
Paul A. Kraft, Estate Planning Attorney
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.

Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Paul A. Kraft, Estate Planning Attorney
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