There are many times in life when people may consider drafting or reviewing their estate plans. Often, the events that inspire people to think about their loved ones and their legacies are personal. People create estate plans when they get married or become parents. They review and update their documents when they divorce or when a loved one dies.
Making major career moves can also trigger estate planning in some cases. People frequently review and update their documents as they prepare for retirement. Individuals starting small businesses or professional practices may need to create or update an estate plan to protect themselves, their loved ones and the business they intend to start.
Families may fight over a business
Valuable assets can tear families apart when someone dies. Previously close family members may end up fighting tooth and nail over the ownership interest in a business or professional practice. They might even initiate probate litigation in the hopes of gaining control of the company.
Estate planning is therefore important for the protection of family relationships. By designating a beneficiary to inherit the company or transferring it to a trust for a trustee to manage, the party starting the business can prevent conflicts.
People need protection from failed businesses
While families may fight over a successful business, the entrepreneur may face legal challenges if the company fails. Creditors, people who blame the business for their injuries or even employees might sue if the business fails.
Depending on the business structure and any financial commingling that occurred, plaintiffs and creditors can sometimes try to lay claim to the assets or future income of the business owner. Prior planning, including moving assets to a trust, can help protect resources in the event of a business failure.
Succession plans protect the company
Everyone who works for the company or otherwise depends on the business could be in a difficult situation when the owner dies or has a medical emergency. In addition to addressing ownership in the estate plan itself, the business owner may want to create a succession plan. They can identify candidates to take over their role, explain what training they may need and describe their daily responsibilities at length.
People who create and regularly update their estate plans can help protect themselves and their loved ones from all kinds of challenges. Those starting a business may need to establish an estate plan or update their existing documents because of their new economic activities.