Business & Succession Planning

If you have a business it is important to make plans for the business, once you pass away.

One option is for your family to continue with your business. It is important to plan for the possibility (or probability) that the value of your business can continue to grow between the time you create your estate plan and the time you pass away and to know that the business will be valued at the date of your death for estate planning purposes.

If you want one or more of your children or other family members to take over your business, it is important to start planning now. Life insurance or an irrevocable life insurance trust (ILIT) can be used to provide the funding your family members will need to operate and grow the business or to compensate the children who will not work in the business.

If you want one or more of your children or family members to take over your business while you are still alive and retain a source of income for yourself, The Law Offices of Deborah Azar, P.C. can assist you in creating a grantor retained annuity trust (GRAT) or grantor retained unitrust (GRUT). With those kinds of irrevocable trusts, if the assets of the business grow over the term of the trust, the appreciation will not be subject to estate taxes. For these types of trust to be effective, you have to outlive the term of the trust. If these types of trust are combined with an irrevocable life insurance trust (ILIT), then the life insurance proceeds can help offset the potential tax liability that would occur if you die before the term of the trust is over.

Other vehicles to transfer the business to your children or family members are the family limited partnership or family limited liability company. These business entities would hold the business assets and some of the units or shares can be transferred to your family members, and therefore will not be in your taxable estate when you die. If the interest transferred does not carry control of the business entity, the value of the transferred assets may be discounted for gift tax purposes.

If you co-own your business, an option to consider is to have a contract that upon the death of any of the owners of the business, their interest will be purchased by the other owners. This contract can ensure that your family (and the family of your co-owners) do not become owners unintentionally. The business can purchase life insurance or create an irrevocable life insurance trust (ILIT) to pay for the interest and provide the liquidity necessary to buy and sell the interest of the owner. This ensures that your family will be paid the value of your interest in the business once you pass away and your co-owners can continue with the business.

You may also consider selling or transferring your business during your lifetime.

The Law Offices of Deborah Azar, P.C. can assist you in evaluating your options and creating a business succession plan tailored to your needs as a part of a comprehensive estate plan.

Contact The Law Offices of Deborah Azar, P.C. to start planning and stop worrying.