Consider Life Insurance 3

Another small step you can take is to consider obtaining life insurance. Liquidity is often an issue in estates where most of the assets are small business holdings. Life insurance can provide a lot of flexibility to equalize shares among the family members who will be involved in the business and those who cannot or do not want to be involved. It can be useful for purchasing ownership interests from family members that may want to leave the business, or from outsiders that the new leadership no longer wants involved with the business. It is also useful to have cash available to pay any estate or income taxes that may become due. If you have set up your basic documents, you can initially make your trust the beneficiary of the life insurance. This defers the need to name individuals as beneficiaries if you have not yet clearly defined some of the details of how the policy will be used.

Estate and business planning is an ongoing process, not a one-time transaction. Just because you are not ready to make the big decisions regarding the transfer of your business does not mean you have to wait to take any action. By taking some of these smaller steps now, your transition plan will be more easily implemented in the future, and more adaptable to the ever-changing economic, tax, and business environment.

TK