When you own a business, estate planning becomes a bigger challenge. Not only do you have to provide for your personal assets, but you also need to make a plan for your business. Here's what you need to know.
Can You Leave a Business in a Will?
You can leave a business in your will just like any other asset. You can leave it to a specific person, divide it between multiple people, or include it in your total estate that will be divided up. If you don't own the entire business, you would be leaving your shares of stock in the business rather than the entire business.
What Happens If Your Business Owes Money?
If your business owes money, it would be handled similarly to your personal assets. Remember that if you have credit card debt when you pass away, your heirs don't inherit your debt, but the creditors get to take enough money to pay the debt from your estate before your heirs get their inheritance.
With a business, the debt would stay as part of a business. If the business keeps running, the debt would get paid back from the business's ongoing income and not out of your heirs' own pockets. If the business is to be sold off, the debt would be paid off from the proceeds with your heirs getting the remainder according to your will.
What If Your Heirs Don't Want to Run a Business?
Leaving someone a business that you actively run is tricky because they may not have the desire or ability to run it. In that situation, leaving them the business could become more of a burden than a gift. While they'd have the option to sell the business, they'd have to deal with managing it until the sale goes through.
If you plan to leave someone a business, you should talk to them about your life goals. Make sure they're willing and able to run it after you're gone. To help their transition, consider bringing them on as a manager or an employee while you're still around to help them.
If your heirs say they wouldn't want to continue the business, you should have a succession plan. This might be to have your business partners buy you out or for a trusted manager to take over with profit payments going to your heirs.
To learn more, talk to a local estate planning attorney today.Share