A business could be someone’s greatest source of pride, other than their loved ones. They may have dedicated years of their life toward the creation and expansion of a successful business enterprise. When such people start thinking about retirement or even what may happen after they die, concerns about the business could very well arise.
No one wants a company that they created or helped expand to suddenly shut down because they die, retire or have some kind of personal emergency. A solid Colorado estate plan for a business owner usually includes instructions about how to address their company ownership. This ownership may be managed in a variety of ways. The following are some of the most common.
Adding it to a will
Perhaps the simplest way to transfer one person’s ownership interest in a company to a specific beneficiary is by naming that person in a will. Once the probate process is over, the beneficiary selected by the current owner can assume control over the company. However, there are certain drawbacks to this approach. There can be a lot of downtime between when the owner dies and when the new owner technically has legal authority over the company. Transferring a business with a will might mean that the new owner sells the company off instead of running it and keeping it in the family. There could also be estate taxes if the business is worth millions.
Transferring the business to a trust
Perhaps a testator would like to grant each of their children an equal share in the business’s value. Maybe they want to include Provisions in their estate plan to prevent the sale of the company to an outside party. It might even be estate tax concerns that lead to someone moving a business into a trust. Using a trust to control who inherits a business can be very useful in a variety of different situations.
Arranging for the sale of the business
A testator might instruct the personal representative of their estate to sell the business after their death and then do something specific with the proceeds from that sale. Selling the business can be a viable solution when someone does not have a specific family member to take over the business. Someone can even include the right of a first refusal in their planning paperwork so that a family member could choose to purchase the business before the estate attempts to sell it to an outside party.
Someone’s family circumstances, the nature of their business and the value of their other assets can all influence which option would be most appropriate for addressing a business as part of a broader estate plan. Arranging to transfer both leadership and ownership of a business can help ensure that a company continues to thrive after its current owner dies or gives up control over the organization.