Law Office of Rick Todd Blog

Tuesday, September 27, 2016

Buy/Sell Agreements Are Crucial in Estate Planning

Estate planning is commonly thought of as something that individuals prepare for. However, estate planning is used to distribute a person’s property, and often one piece of that property is a business. Businesses need to have a clear path to beneficiary distribution just like a house or a car. If they don’t have one, the value of the business could be lost to your family.

What are buy/sell agreements? A business owner makes a deal with his partners or with another firm for his share in the business to be bought out in the event of his death. In this way, a value can be locked into place for the business and the hardship of having a family member put the business on the market is avoided. The business is valued fairly in the agreement which gives the family of the owner a way of knowing how much the business is really worth.

In Howard County, much of the wealth in the county is based around small business owners, particularly in wealthy small cities like Clarksville, Columbia, and Ellicott City. These business owners are savvy when it comes to managing their enterprises, but they are often skeptical of estate planning and agreements such as these. Why? Because these things are often linked to salespeople who sell insurance and financial planning.

Buy/sell agreements don’t only become important after someone has died. They can be activated at any moment in the business owner’s life. An owner’s retirement or disability could also mean that the agreement comes into play, allowing the owner to be relieved of the burden of ownership and to have money for necessities.

Are there risks to buy/sell agreements? Of course. The value of the business is not static and it needs to be revalued as time passes. The agreement must be closely linked with

the rest of the owner’s estate plan. The people involved should also be kept up to speed. Creating an agreement that doesn’t include the owner’s family could lead to surprise and terror in the event of someone’s passing. 

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The Law Offices of Rick Todd has offices located in Columbia, Chevy Chase, Fairfax, Virginia, and Maryland and serves clients throughout Clarksville, Columbia, Ellicott City, Fulton, Rockville, Bethesda, Potomac, Laurel, Howard County, Montgomery County, and Washington D.C.

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