Estate Planning Considerations for Small Business Owners

Small business owners have unique estate planning needs. When considering small business financial solutions, it is important to consult with an attorney. Two issues especially must be considered: the impact of the owner’s death on the estate (and the business that is part of the estate), and the potential costs of long term care if the owner remains alive, but not healthy enough to function

Think of Long Term Care Needs

The costs and impacts of health care and assistance that may be needed as the small business owner grows older and possibly becomes infirm are issues that need to be properly addressed. It is possible to avoid losing government benefits such as Medicare (which does not cover long term care), without sacrificing valuable assets in the process, and an elder law attorney can provide helpful advice to smooth this process.

An adequate estate plan will help to ensure that valuable assets, such as the small business, are protected, so that they may passed on to beneficiaries, rather than lost to pay for health care costs. Legal documents in the estate plan will help to make clear the desires of the business owner to protect certain assets from being used to pay for long-term health care and other needs, while still providing distribution of assets that the individual desires.

Consider Your Investment Vehicles

One of the key estate planning errors that experts caution against involves too much money tied up in illiquid financial vehicles, such as annuities, that may incur penalties if the money needs to be used. It is also crucial to have adequate long-term care insurance with affordable premiums, so that the costs of preparing for a worst-case scenario in the future do not erode too much of the estate before the death of the business owner. Advance directives should be in place to plan for expected health care contingencies, such as the small business owner being no longer able to manage the affairs of the business. Beware of forms available online or in books, as they may not be fully valid, or they may not provide the protections that the owner is seeking.

Make Your Intent Clear

Problems arising from failure to plan for predictable expenses such as long-term care, or failure to adequately designate beneficiaries, can result in confusion later. Small business owners, especially, need to be certain that their estate planning documents are tailored to their unique needs. Simply filling out some “standard forms” may lead to conflicts among heirs as to intent, or the forms may fail to follow the laws of the state adequately. Transfers of valuable assets during the lifetime of the individual can be costly in taxes and fees, but proper transfer through a will or trust can save the value of the asset for future generations. The advice of an elder care lawyer is critical to avoid some big estate plan mistakes.


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