Attention family business owners: when was the last time you updated your estate plan?
If you’re similar to an estimated 50 percent of the business owner population, the answer is probably not in the last five years. But just because you may have plenty of company doesn’t mean you should stay in the same place. In fact, failing to update your estate plan could have a detrimental effect on your family’s assets.
As a business owner, it's quite likely a significant portion of your wealth–and your family's source of income after your death–is tied up in the family business. With that in mind, don’t you want to rest assured knowing both your family and the company you worked so hard to build are protected? If your answer is yes, then read on!
Check out these statistics, according to a recent study:
- Only 22 percent of family business owners updated their estate plan in the last two years.
- Just 25 percent of owners updated their estate plan less than five years ago.
Despite the fact family business comprise more than 70 percent of companies worldwide, it’s astounding more haven’t taken the necessary steps to make sure their estate plan is current. An up-to-date plan can ensure a seamless transition of property from one generation, while providing many tax benefits. Also, considering the transient nature of business dynamics, estate planning is extremely important when it comes to the health and longevity of a family-owned company.
While there’s no definite rule of thumb, it’s smart for family business owners to reexamine their estate plans at least every few years, as there are many life and company circumstances that can cause them to become outdated. Relations among family members, shifting business matters, and changes in net worth are just some of the factors that can create a need for estate plan revisions.
Why is an up-to-date estate plan so important?
- It ensures safe passage of family business from one generation to another without disputes that could hinder its growth or prosperity.
- It’s useful in offloading family business for a fair price deal.
- It helps one take advantage of several options to avoid estate tax, gift tax and other taxes legally.
- Your business may have accumulated more wealth since your last estate plan update. An updated plan can enhance value while adding protection to your assets.
- It will help those that inherit your business to control your assets, while minimizing taxes imposed by State and Federal government.
Bottom line: If it’s been a few years since you’ve updated your family’s business estate plan, schedule a time to make it happen. Regardless of how complex your situation may be, a financial professional can work with you to ensure your estate is in order and protected.