For Mark Roberts’s Use: Estate planning can be a complicated process for anyone. You have to consider the possible needs of your heirs during a difficult time in life, and balance those needs with the legal and tax ramifications of your decisions. As a business owner, you have the same considerations of anyone else, but with the added responsibility of protecting your company. Your family’s income stream, as well as the livelihoods of your employees, are all at stake.
For this reason, it’s important to consider the possibility of federal, estate, or state inheritance taxes that may be due upon your passing. If your heirs cannot access the cash needed to pay the bill, they could be forced to undertake significant debt or liquidate the business you spent your life building. A life insurance purchased in an irrevocable trust will provide a cash payout that is free from your taxable estate. Your heirs will have the money they need to protect your business.
If you co-own your business with a partner, you may have additional concerns about the survival of your company. Many business partners find survivorship life insurance policies to be useful estate planning tools. These policies insure the lives of two people, only paying benefits after both parties pass away. After the death of both partners, heirs are provided the cash they need to cover business expenses and make sound decisions about what to do with the company.
A survivorship policy may also be a less expensive policy than traditional life insurance, because the odds of both people dying at the same time are very low. This often makes survivorship life insurance policies a very affordable option for older business owners.
Whichever type of life insurance option you choose, creating a trust will be an essential part of your estate planning. Tax rules can be complicated and change frequently, so careful consultation with your tax professional, life insurance agent, and estate planning attorney are key to creating a successful protection plan for your business.
