As the holiday season approaches, business owners often find themselves spending time with family and sharing meals around the table. Being surrounded by your loved ones during the holiday season is an ideal time to address an often-overlooked matter; estate planning.
Estate planning is especially important for business owners because it addresses both personal and business assets. Failing to plan can result in legal obstacles and financial risks for your heirs and business partners.
Proper estate planning protects your business, ensures that your wishes are honored in the event of incapacitation or death, and minimizes tax liabilities.
When addressing your estate plan, consider the following essential elements.
Wills & Trusts
Individuals can utilize both wills and various types of trusts, such as revocable trusts, in transferring business assets. Without a proper estate plan, the probate process can take several months, during which time your business could suffer. A revocable trust allows you to bypass the probate process, ensuring that your business continues to operate without delay. Holding your business interest in a trust helps your heirs avoid likely administrative bottlenecks.
Power of Attorney & Healthcare Directives
A durable financial power of attorney and an advance healthcare directive ensures that a trusted individual will manage your business and personal affairs if you become incapacitated. These documents should be prepared in compliance with Ohio law to ensure enforceability.
Business Succession Plan
Ohio law allows for the seamless transfer of business interests through a well-designed and implemented succession plan. A succession plan specifies who, whether a family member, business partner, or key employee, will take over the business. Without a succession plan, probate courts may step in to determine ownership, which can be both costly and time-consuming. Succession planning ensures business continuity and minimizes the risk of disputes.
Tax Considerations
While Ohio does not impose an estate or inheritance tax, federal estate taxes may apply to estates over the federal exemption limit. Gifting business interests before death or implementing charitable remainder trusts are strategies that may reduce taxable estate size and help preserve wealth. Business owners can ensure their estate plan minimizes federal tax liabilities by working with experienced legal and tax professionals.
As a business owner, taking the time to create or review your estate plan is a critical step to secure your family's future and to safeguard your business interests. Rest easy during the holiday season by planning early.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
