Business owners have a lot on their plate, and estate planning often falls to the bottom of their list of priorities. Some say they have too much to do; others fail to see the value of this type of planning.
However, there are real consequences when a business owner passes away without putting together an estate plan.
Leaving your business in the lurch
The death of a business owner can leave employees, partners and clients without a clear understanding of what the future holds. Will they still have jobs? Who will take over for the owner? How can they protect some semblance of continuity?
A business owner without an estate plan leaves many decisions in the hands of people without any direct connection to that business. In these circumstances, financial institutions and the legal system can be making decisions regarding the company, rather than those who are most familiar with it.
Losing valuable information
Business owners can be a wealth of information. They often have insight in areas, including:
- A vision for the future of the company
- Proprietary information unknown to others
- Personal details about clients or colleagues that affect professional relationships
- Passwords and logins to business-related accounts
This information can be lost when an owner passes away without making an estate plan or discussing them with other parties during succession planning.
Causing family conflicts
Families can struggle immensely when a person passes away in intestacy (without a will). And when there is a family business at stake, emotions can be running high.
Parties can fight over matters from whether to sell the business to who will run it. Without a plan, these complicated issues can spark bitter conflicts and strain family relationships.
Missing out on cost savings
One primary benefit of estate planning is to minimize wasteful spending and unnecessary costs when administering the estate. Trusts, tax avoidance and other strategies can all be ways to reduce the financial toll on businesses and beneficiaries.
If you do not have a succession plan or estate plan in place, the people you leave behind could wind up facing costly repercussions and losses.
Considering all the parties affected by whether a business owner has completed planning documents or not, moving this task up on the list of priorities can be wise.