Transferring Personal and Business Assets
Many strategies exist within estate law to ensure that a business owner's personal and business assets are transferred smoothly when the time comes - all while minimizing estate taxes and business transfer taxes.
Often a business owner will want to leave a business to his or her spouse, or children, upon death. To make that happen legally, the business owner will need an estate plan in place that handles the transfer of his or her business interests, including any shares of stock, to the chosen beneficiaries.
But what about the business owner's personal assets? Often, such assets are just as valuable, or more so, than business-related assets, and will require careful planning to ensure a smooth distribution among beneficiaries.
Without such a plan in place, often a will or trust, the deceased's personal assets may be tied up in probate court, a fairly lengthy and often expensive procedure.
When a business succession plan is in place, it can greatly help a business transition itself after the death of the business owner. A business succession plan will often identify:
- Business ownership - who owns the deceased's shares of the business,
- Business management - who is in charge now, and in what capacity,
- Family member business roles - identifying any family members who are inheriting active roles in the operation of the business,
- The timeline for execution of the succession plan.
Essentially, a good business succession plan leaves no doubt as to who owns the business, who's in charge of day-to-day operations, and what everyone's responsibilities are.
In recent years, there have been some pro-business changes in tax law. For example, in 2013, legislation took effect allowing for a greatly reduced transfer tax - thus reducing the tax burden for business owners transferring their businesses.
While the savings on business transfer tax is a boon for business owners and their families, it now means that the tax concern has shifted to the beneficiaries. As such, estate and business lawyers looking to reduce their clients’ overall taxes during a business succession may look to apply tax strategies at the individual level.
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