Many people consider estate planning something you do in preparation for your final days. As some people grow older, they become more concerned about things like drafting a will or creating powers of attorney should they become disabled by advanced age.
While both of those reasons are perfectly valid, people who own businesses should not wait until they grow old to establish their estate plans. Additionally, business owners who have already completed some estate planning need to ensure that those plans are still relevant and current with changing circumstances.
This is because estate taxes can seriously affect the value of your business in intergenerational transfers. Ideally, a business owner will want to pass on his or her hard-earned business to other family members or esteemed friends without losing much of the value of his or her life’s work. Unfortunately, if you don’t stay current with your estate planning strategies, you run the risk of incurring significant tax liabilities.
This is especially true of business owners that have more complicated arrangements. For example, businesses that employ sophisticated strategies like self-canceling installment notes and certain annuity or marital trusts may more vulnerable to changes in tax laws over the years.
One survey conducted amongst 513 business owners found that many of them had done at least some form of estate planning. Seven out of 10 of those business owners surveyed had completed at least a traditional will. Still, 138 of them had not taken any steps to protect their businesses in the event of their passing. Some of those business owners explain to researchers that they had not engaged in any estate planning because they found the process emotionally difficult. Some of them expressed anxiety about having to commit to naming certain individuals regarding the distribution of their assets.
New York has very specific probate rules that govern how your business will be taxed and then distributed among your surviving family members in the event that you die without a will. Don’t let this happen to you. Your New York estate planning attorney can sit down with you and help you develop strategies that will help minimize your tax liabilities and transfer your business to your loved ones.
Source: Forbes, “Most Business Owners Do Not Have Up-To-Date Estate Plans, But They Should” Russ Alan Prince, Feb. 24, 2015