Many people decide to establish an estate plan to protect themselves or their close family members. However, people may have responsibilities to others beyond their immediate family members.
Those who have started or purchased businesses or professional practices may have a variety of obligations to others. They may have employees who rely on them and customers or clients who require the services or goods they provide.
An estate plan can be a way to protect a business or professional practice and the people who rely on the organization. What are some of the ways that testators can protect a company when creating an estate plan?
1. Establishing a succession plan
Succession planning involves identifying candidates to take over key roles within the company or clarifying what candidates for those positions should be capable of doing. Other leaders within the organization can select appropriate candidates for a professional’s replacement when they can no longer work. Succession planning can help companies overcome an emergency that incapacitates an owner or the sudden death of a business owner.
2. Planning for a personal emergency
Incapacitating emergencies can arise with little warning. A professional can end up in a car crash on their way to work one day or might experience a sudden medical event that leaves them unconscious in the hospital for weeks.
Estate plans can include powers of attorney that authorize another person to take over certain business tasks. Financial powers of attorney can help ensure that a company remains solvent and can continue operating until the owner recovers from their condition and can return to work.
3. Arranging for the transfer of ownership
When the owner of a company dies, filling their role within the company is only one consideration. They also need to ensure that the right person or people inherit their ownership interest in the company.
Some people decide to establish trusts as a way of preventing their beneficiaries or heirs from selling or dissolving the business after their death. Others choose to leave the business to a specific family member.
It is even possible for business owners to name multiple family members to co-own the business. Those people can be different from the individual taking over their responsibilities within the company.
Estate planning is often particularly important for those who run businesses because so many more people depend on them. Taking the time to address emergencies and the future of the company can give business owners and the people who rely on them greater peace of mind.