Inheritance planning is always complicated as you make decisions about how to take care of the people in your life after you are gone. When you own a business, however, the complexities of planning for life after your death become even greater. Not only do you need to ensure that you are leaving a legacy for your family but you also need to consider what will happen to your company when you are no longer around to run it.
Because inheritance planning for business raises many different legal issues to consider, it is important that business owners get help from a trusted legal professional with experience advising clients on business succession issues.
The Montpelier inheritance planning lawyers at Unsworth LaPlante, PLLC know how the laws on asset transfers work and we also understand the special issues raised when you are a partner in a company. We will help you to make the right decisions based on your situation to protect your business partner, your family members, and the company you have created. Give us a call as soon as possible so we can help you to develop a plan.
Inheritance Planning Tips For Business Partners
When you are a partner in a business, the key things you will need to consider during the inheritance planning process include:
- Do you have a buy/sell agreement with your business partners? When you started your partnership, you probably were advised to create an agreement that deals with disability, divorce, death, and the departure of any business co-owner. Your agreement may specify that your business partner has first right to buy your interest in the business. If this is the case, then you can’t necessarily leave the company to your family- your share may have to go to your business partner and your family members would get the money for the value of your company ownership interest.
- Does your partnership agreement address business succession issues? Most partners have a partnership agreement, which may exist in addition to a buy/sell agreement or which may exist even if no buy/sell agreement is in place. If you have a partnership agreement, you should check to determine if it addresses how the company will transfer upon death, departure, or disability. These issues may be addressed in this legally binding partnership contract even if there isn’t a buy/sell agreement.
- Does your partner have the money to buy your family out? Just because your partner may have the right to buy your business interest upon death doesn’t mean your partner will have the money to. If you want to make sure your partner can pay your family so he takes over the business, it may be beneficial for your partner to purchase a life insurance policy in your name. Likewise, if your family wants to buy your partner out and continue operations after you are gone, a life insurance policy could make it possible for your family members to do that.
- Is there the potential your estate will be taxed? If you have an ownership interest in a partnership, this interest has value. It will be considered when determining the total value of your estate. An assessment of the value of the estate will determine if estate taxes have to be paid. The IRS explains that in 2016, estate taxes are assessed when the value of an estate is $5,450,000 or greater. If your partnership interest pushes your estate over this level, your family may have a hard time coming up with the cash to pay taxes – especially if a lot of your money is tied up in the business and you don’t have much liquid cash. Your family could be forced to sell your share of the business to get the money to pay the taxes.
These are just a few of the many things to consider when creating an inheritance plan if you are a partner in a business. There are ways to protect your company, your partner, and your family- but you need to know the law.
How a Montpelier Inheritance Planning Lawyer Can Help
Unsworth LaPlante, PLLC provides invaluable guidance for business owners during the inheritance planning process. To learn more about this topic, join us for a free seminar. You can also reach out to our legal team to get personalized advice for your situation. Call at (802) 879-7133 or contact us online today to speak with a Montpelier inheritance planning lawyer and to find out what steps you should be taking so your business can transfer successfully and so operations can continue uninterrupted after your death.