Survivors are almost always emotional when dealing with the passing of a loved one, but if the deceased is a business owner it is important to limit the impact on businesses and operations.
The drama that surrounds survivors after a death can affect businesses of all sizes from tiny Mom & Pop operations to large corporations as heirs question whether they are being treated fairly
This leads to emotionally fueled conflict that can be difficult to resolve.
One of the goals of estate planning is to make it so that any emotions do not affect how the estate will be distributed and do not lead to unnecessary litigation. If you own a business, or even just a part of one, you can create a business estate plan to accomplish the same goals for the business.
In "Don't Be So Emotional: Drama-Free Business Estate Planning" Forbes described some methods that can be used to accomplish this, including:
- Buy-Sell Agreement – This allows you to set a valuation for your share of the business, determine who will be getting it and make sure that your heirs receive fair value.
- Escrow and Trusts – Stock can be held in escrow until such time as agreed upon plans are carried out. Trusts can be used for all sorts of things, such as holding stock, voting, and buy-sell agreements.
- Pre-Funding – One of the biggest sources of conflict over business succession is when any party that will receive a payment gets the money. This can be resolved by using pre-funding to make sure that the money is available when you pass away.
A qualified estate planning attorney should be consulted to ease the drama and head off the conflict.
Reference: Forbes (Nov. 9, 2015) "Don't Be So Emotional: Drama-Free Business Estate Planning"