Whether you own a large successful company or a small "mom and pop" business, Estate Planning and Business Succession Planning are essential. Most people believe they are combined together. However, while they do work hand-in-hand with one another, they are two entirely separate, though equally important, tools.
Let's discuss the differences between the two, and learn why they are both needed if you are a business owner.
Estate Planning
Estate Planning ensures that your heirs will receive everything you’ve arranged for in your Estate Plan. While this puts everything in order after you pass away, this also minimizes excessive financial burdens on your heirs, such as fees and tax complications associated with the Probate process if you were to not have an Estate Plan in place.
Things Estate Planning typically consists of:
⦁ A person's source of income and their wealth.
⦁ Personal Assets/Property.
⦁ Insurance Policies or Investments.
⦁ Heirs and to Whom they would like to distribute their Assets.
⦁ Financial and/or Medical Powers of Attorney.
⦁ Funeral Arrangements.
⦁ Other Last Wishes.
What good Estate Planning should accomplish:
⦁ Avoiding Probate, or limiting the process
⦁ Avoiding Estate Taxes.
⦁ Making sure items are passed to the right people.
⦁ Avoiding delays in Asset Distribution.
Business Succession Planning
Business Succession Planning focuses on actual business continuity. Let's say you had no Succession Plan in place; you're in great health with a long life ahead of you, and suddenly have a heart attack. You would leave behind not only a business with no legally issued successor, but also would leave behind no plan to keep the business going. Good Business Succession Planning makes sure these things are clearly stated and taken care of, if and when the time comes, in the event of death, disability, or retirement.
There are different things that should be considered during Business Succession Planning. Training, including Leadership preparation, should also be planned out. Who will be filling Key Leadership positions and any other important roles is one of them, as well as which skills are needed to successfully keep the business running. Needs that may be caused by marketplace and/or technological development should also be taken into consideration.
What good Business Succession Planning should accomplish:
⦁ Seamless business continuity and direction for business if you or other key leadership were to leave the company suddenly.
⦁ Ensures an agreeable price for a partner's share of the business, eliminating the need for valuation upon death.
⦁ Preservation of important business relationships.
⦁ Preserved business values and Employee retention.
Both of these items are more than likely important in different ways in the case of both Family-Owned companies and large businesses. Contact Us today to schedule a Free Consultation and discuss which, if not both, are recommended for you.