Perhaps you are wondering how best to plan for the transfer of your business after you are gone.
The business is thriving and continues to prosper. You need to create a succession plan and decide how to transfer your business assets while minimizing taxes.
Developing a business succession plan
A well-developed succession plan will help transfer the ownership and management of your business. Consider these points to include:
- Authority and responsibility of successors
- Successor development, training
- Outside advisers or directors
- Equitable compensation plan to retain the best employees
- Coordination between business owners and managers
- Setting a time to transfer the business during your lifetime
Minimizing taxes
The value of the business may increase between the time you create your estate plan and the time you die. Your taxable estate will include the value of your business on the date of your death. To manage this, you can create an Irrevocable Life Insurance Trust (ILIT). The ILIT insurance policy will provide benefits that are not subject to probate. Liquidity is immediately available for needs such as the payment of estate taxes.
Transferring the business to children
Another trust to consider is the Grantor Retained Annuity Trust (GRAT). With this trust, it is possible for you to pass your business assets along to your children and retain your own source of income. If the assets continue to grow, your heirs will not have to pay estate taxes on the appreciation.
Seeking help
There are other estate planning options to consider that will save taxes and achieve the goals you have in mind for transferring your business. Your attorney can help you develop your business succession plan, establish the process for determining worth and provide legal oversight when the time comes to transfer assets.