Business Succession and Estate Planning

As a business owner, your company is likely to be your most valuable asset. To ensure it survives after you’re gone, your estate plan must address the tax impact of transferring your ownership interests to the next generation. It can also provide a smooth transition of the business to your family members after you retire.

Ensure Key Documents Are in Place
A comprehensive estate plan should be supported by several key documents, starting with a basic will. A will specifies how your assets will be distributed to designated beneficiaries and meets other objectives. Without a will or having assets otherwise titled, your business and other assets will be distributed under the prevailing state law, regardless of your wishes.

A financial power of attorney (POA) appoints someone to manage your affairs in case you become incapacitated, and allows this “attorney-in-fact” to conduct business transactions. The POA should be complemented by the guidance of health care directives.

Make Use of Tax Breaks
If you own significant business assets, consider maximizing the currently available federal estate tax breaks. This includes using the unlimited marital deduction and the federal gift and estate tax exemption, which in 2024 shields up to $13.61 million. Some states also impose their own state estate or inheritance taxes. You may be able to minimize federal and state taxes by using multiple trusts or setting up a family limited partnership (FLP). With a tax-favored FLP, the assets are removed from your taxable estate, and limited partner interests can be gifted to loved ones, often at
a discounted value.