For those that are self-employed, your business is more than just a source of income – it’s a significant asset that needs protection and consideration in your estate planning. Let’s explore some of the essential considerations of estate planning for self-employed individuals to ensure a secure future for you and your loved ones.
Comprehensive Business Succession Plan:
For self-employed individuals, the fate of their business is intricately tied to their personal estate. A comprehensive business succession plan is crucial to ensure the smooth transition of your business in the event of your incapacity or death. Your business succession plan should outline who, how and when your business will pass to another person or company when you retire, are disabled, or pass away. The most common types of business succession plans for solo or small businesses include:
- Selling your business to a co-owner. If the business was founded with just two partners, the surviving partner can agree to purchase the other’s interest if one owner retires, dies, or becomes disabled.
- Passing your business on to an heir. Popular with business owners who have children or family members who work in the company, this type of agreement needs proper planning, so as not to stir up family conflict.
- Selling your business to a key employee. Choosing a key employee to take over can help you ensure that your business will be run by someone who is experienced, respected by your staff, and knows the essential procedures and relationships.
- Selling your business to an outside party. Depending on the type of business you have, if there isn’t an obvious successor, you may look to the community to sell your company – perhaps to a local entrepreneur or a competitor.
- Selling your shares back to the company. If your company has multiple owners, establishing an “entity purchase” or “stock redemption” plan will enable the surviving owners to keep control of the business by purchasing the shares of the owner who retires, passes away or becomes disabled.
Protecting Intellectual Property and Digital Assets
In the digital age, intellectual property and digital assets play a significant role in many businesses. You and your business likely own various copyrights, trademarks, patents, or even digital assets like websites, blogs, or online businesses. Ensure that these assets are accounted for in your estate plan and that you have designated beneficiaries to manage and continue their use appropriately.
Ensure Adequate Life Insurance Coverage
Being self-employed, you may not have the same access to employer-provided life insurance or other benefits. Therefore, securing adequate life insurance coverage is essential to protect your family’s financial well-being in the event of your untimely death. Consider the financial needs of your dependents, outstanding debts, and future obligations when determining the appropriate coverage.
For the self-employed, estate planning is more than just a financial exercise; it’s a way to safeguard the legacy of both your personal and professional life. Taking the time to create a comprehensive estate plan tailored to your unique situation can provide peace of mind, knowing that your loved ones and business will be well taken care of when you’re no longer around. Contact Beaupre Law for help navigating the complexities of self-employment, and ensure that your wishes are fully realized.