No one likes to think about their mortality, but if you’re a business owner, it’s essential to plan what will happen to your business when you die. Otherwise, your loved ones could be left with a massive headache and a company that isn’t worth nearly as much as it should be. Surprisingly, 68% of Americans do not have a will. If you are one of them, it is time to act now.
Here’s what you need to know about what happens to your business after you die.
If You Have a Partner, They Will Automatically Become the Sole Owner of the Business
If you have a partner, they will automatically become the business’s sole owner. In most cases, the partner will be the person who inherits your estate according to your will. However, if you don’t have a will or your partner isn’t mentioned in it, the laws of intestacy, or when a person dies intestate, will apply.
Intestate means that a person has died without leaving a will behind. Without a will, the deceased’s property is distributed according to the law. This can often lead to confusion and conflict among loved ones as they battle over who gets what. This means that the state will decide who inherits your business based on a set of rules that vary from state to state.
For example, states like California and Arizona follow the community property law. Here, the living partner automatically gets half of the dead person’s estate. The other half is given to other beneficiaries. On the other hand, states like Kansas and Ohio follow common law. This means that the estate is not transferred automatically, but the living partner gets the right to claim a third or half of the total estate.
Hence, planning beforehand and creating a will that clearly outlines who will hold what estate when you die is wise. This can be a complicated process, so it’s important to consult with an estate attorney to ensure your business is passed on to your partner in a smooth and efficient way. The attorney will help you define the will clearly. He or she will also assist your loved ones in distributing your estate peacefully in the event of your death.
If You Don’t Have a Partner, Your Business Will Go Through Probate and Be Subject to Inheritance Tax
When a person dies, their estate is subject to inheritance tax. This is a tax levied on the deceased’s property, and it can be quite costly. The estate tax rates vary depending on how much the estate is worth. In 2022, the estate tax rates range from 18% to 40%. Your partner may face difficulties in paying the taxes and claiming your estate. Hence, seeking help from a lawyer is advised for a seamless experience.
In the case of a business, the inheritance tax can be costly, as it is often worth a great deal of money. To avoid this tax, it’s essential to have a plan in place for what should happen to your business after your death.
If you don’t have a partner, your business will go through probate and be subject to inheritance tax. This means that the state will decide who inherits your business based on a set of rules that vary from state to state.
Your Family Members Will Most Likely Want to Sell the Business
Though you may have spent your life doing a successful business, your family members may not be interested in keeping it running when you die.
Running a business is time-consuming and demanding because that’s how it is. It is hard and challenging, and tackling those challenges makes you a businessman. Data shows that around 53% of employees tackle challenging situations by ignoring them. However, leaders usually face and solve them. If you feel that running a business is hard, that’s when you are doing it right. And who better than you to understand this hardship? But all your loved ones might not have the same passion for your business, or they might not feel like they are up to taking over.
You can make things easier for them by planning ahead and considering who you want to sell the business to. That way, you can be sure that your business ends up in the right hands.
If Your Family Members Decide to Keep the Business, They’ll Need to Make Some Changes
When it comes to inheritance, many assume that their family members will continue to run the family business after they die. However, this is often not the case. To keep the business running smoothly, your family members must make some changes.
For example, they’ll need to elect a new leader. This person will be responsible for making decisions and keeping the business organized. They’ll also need to create a succession plan to outline how the company will be passed down to future generations.
Finally, they’ll need to update the company’s legal documents and ensure that all employees are appropriately trained. Making these changes may seem like a lot of work, but it’s necessary if your family wants to keep the business running after you’re gone.
Your business is a valuable part of your estate, and it’s important to plan for its future after you pass away. Consult an estate lawyer to ensure everything is in order and clearly defined in your will. If you don’t have a partner, consider who you want to sell the business to or make arrangements for your family members to take over. Planning early will make the transition smoother for everyone involved.