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Drafting a business succession plan? Here are a few things to consider

You’ve put a lot of effort, energy and time into building a successful business, and you want to make sure that you have a proper succession plan in place. You want the business to keep on thriving long after you’re gone.

But where do you even start? It’s difficult to know how to plan when you’re looking ahead at an uncertain future. Here are some starting points that may help.

Business succession options

One option you might want to pursue if you share ownership of your business with multiple partners is to leave your rights to your co-owners. You’ll need to draft a buy-sell agreement that includes a clause allowing your partners to purchase your interest in the company upon your death. 

The above-referenced buyout option is the best approach to avoid leaving uninterested heirs a business that they don’t want or care to manage. An irrevocable life insurance trust (ILIT) or a life insurance policy can provide the liquidity to effectuate such a buyout. Properly structured ILITs avoid the probate process and leave more money on the table to cover estate expenses. 

You may also opt to transfer your business assets into a grantor retained annuity trust (GRAT) or grantor retained unitrust (GRUT). Transfers like this allow your estate to avoid paying taxes on the appreciation of the business assets.

Planning for the future

Owning a business and preparing for its future and that of your loved ones can be challenging. All companies aren’t the same, though. Estate planning can become particularly difficult to manage when you add into the mix your ownership of multiple businesses or higher grossing ones.

You’ll want to have an attorney who has significant experience in handling estate planning for individuals like you, guiding you through the business succession process to ensure your companies’ continued success and your heirs’ futures long-term.