Law Office of Rick Todd Blog

Wednesday, June 28, 2017

Business Succession and Estate Planning Meet at Last

One of the areas of estate planning often looked over is what is popularly called "business succession." Business succession pertains to business owners primarily, or those who might inherit a business.

Business succession goes beyond merely drafting estate planning documents. It means discussing with business partners and/or family members about who is take what from the business, when the business owner passes away. It means discussing continuity of the business, rather than just liquidation.

That means in addition to the typical estate planning documents, you also need a “buy/sell agreement”. This agreement details how you want your business purchased in the event of your death.

Or you can gift your business to others before you die. There are tax consequences to this.

When selecting an individual to run your business, you need to determine whether this person is capable of running the business. Do you feel they deserve the business simply because they are a close relative? It may make sense to give a family member who is not capable of running a business well, but is deserving of your wealth upon your death, ownership of your business but without the ability to manage.

Life insurance can be purchased alongside a buy/sell agreement, with the life insurance proceeds being put towards buying out partners or debt.

Estate planning documents should always be written to take into account business assets. If business assets are put into trusts, the trustee should have strong business acumen.

In Howard County, successful entrepreneurs are more commonly found, particularly in cities like Clarksville, Columbia and Ellicott City. Many entrepreneurs view estate planning as something for the elderly, and not for a business owner. Nothing could be further from the truth. The vast majority of businesses do not survive more than two generations, due in no small part to a lack of post-death planning.

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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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