When you run a family-owned business, that business is directly tied to your family’s livelihood. Any delay in its operation upon your death could be detrimental to your business and your family. It is important to take measures to protect and secure that business in your estate plan. The following are a few tips on estate planning for family-owned businesses.
1 – Keep Good Documentation
One of the best ways to protect your business is to maintain detailed documentation. This includes, but is not limited to:
- Operational Processes and Procedures
- Details of Assets and Holdings
- List of Debts and Debtors
- Vendor Contacts and Order History
- Customer Contracts and Information
- Detailed Bookkeeping and Accounting Records
- Account Access Information
- Any Other Information Critical to the Ongoing and Continued Operation of Your Business
Having good documentation allows your heirs to easily locate necessary information and access resources needed to operate your business.
2 – Make Arrangements with Other Owners
If there are multiple owners in your business, work with them to create a contingency plan. If each owner retains certain responsibilities, consider overlapping responsibilities to provide coverage when needed. This is helpful in general for personal vacations and unexpected absences. In the case that one owner dies, what are the expectations of the other owners? Do they wish to buy out the interests of the deceased owner? Having a clear understanding of what each owner prefers and the plans set in place will create a smoother transition for all involved.
3 – Create a Succession Plan
A succession plan is critical to estate planning for family-owned businesses in Massachusetts. Should one of your children or relatives take over management of the business? Should your heirs hire an independent professional to run the business? And if so, what credentials would a qualified candidate possess. Should the business be sold? These are all important questions to consider. Read our article on Business Succession Planning for Small Business Owners for more information on this topic.
4 – Buy Life and Disability Insurance
Life insurance is an absolute must for small business owners. Should there be an issue with the family business, your family may be left with no immediate funds for their daily living expenses. A life insurance policy would alleviate that burden. With many different policies available, there are options to fit different budgets and needs.
5 – Keep Your Estate Plan Updated
Estate planning for family-owned businesses in Massachusetts is not something that you do once and forget about. Your estate plan is only good if it remains current and reflects any changes to your business or personal life. Both can easily change at any time, so review and update your estate plan yearly to ensure that it continues to reflect your needs and preferences.
More on Estate Planning for Family-Owned Businesses
For more information on estate planning for family-owned businesses in Massachusetts, contact our team. We will take the time to understand your business and family dynamics and to explain all available options. We will also routinely review and update your estate plan to ensure that it achieves your goals and preferences.