Five Key Estate Planning Tips for Business Women

Every business owner knows that they must protect their assets. Legal documents keep your properties and money secure during your life, and then a well-thought-out estate plan ensures a smooth transition of your assets to your heirs after your death.

An estate plan is a set of financial and legal documents that protect your personal and business financial assets after you die. These documents include your last will, a notary affidavit signed by witnesses, a financial trust, power of attorneys, and any tax papers. These signed documents ensure that your business stays safe. An ironclad estate plan protects your business assets to ensure they transfer into the right hands. 

Estate Planning Importance for Female Business Owners 

Female business owners need to protect their assets against liability, claims, or heavy-duty. Suppose you are married or widowed with children and intend to pass on your business to your immediate family. In that case, there are some fundamentals you should be familiar with to ensure that your business stays in the family. Single women without any children can leave their business in the hands of a close relative or trusted friend based on who is competent enough to retain and increase business success. It is best to consult an estate attorney or a financial advisor for the best course of action and then draw up your last willthat includes all your wishes. A firm, irrefutable and definitive estate plan protects your estate and heirs from hefty legal fees, taxes and shortens the probate period.

Even if you have established an estate plan before, it is best to update it after every few years. The estate laws in your state may change or update over time. Your circumstances may change, which would necessitate an alteration in the distribution of your assets. There isn’t a single checklist for everyone. However, the following are the basic tips that female business owners must keep in mind before drafting an estate plan.

Prepare for Your Ultimate Passing

You have a personal financial obligation to your business and your dependents. The day-to-day management of a company can make you too busy to focus on long-term eventualities. At the same time, you must also prepare for the future. 

Shares:

Business owners usually transfer their shares in the company to their business partners. Entrepreneurs pass it on to their spouses. If you do not have a succession plan for your business, the business automatically transfers to the spouse. This transfer runs as per state laws. 

Agreements:

Make sure to keep up with your buy and sell agreement. This agreement states how your shares will distribute in case of a business partner’s death, retirement or disability. The agreement covers all the clauses even if the partner is alive and well and wishes to sell their shares. 

Life Insurance: In addition, buy life insurance policies with your business partner/s. In case of death, the policy ensures sufficient funds for the surviving partner. The surviving partner/s will then be able to buy back your shares from the estate. This strategy safeguards continuous control over the business. 

Setting up A Trust

Your estate plan can also include a trust. You can add your business properties and liquid assets to your trust. Before opening any account to add to the trust, make sure you already have a list of beneficiaries who can access the account. If you do not have a list of beneficiaries identified by name, it may lead to complications later on when you transfer the trust. 

During your lifetime, you can access the trust as you please. It makes the trust revocable. Once you die, nobody can add anything to it. A successor trustee will take over and distribute the assets. What makes a trust special is that the assets listed under the trust act as a group. There is no single beneficiary to the trust. All beneficiaries have equal access to the assets in a faith. Trusts do not have probate, and transference is immediate. It is a better way to provide for minors and minimize estate taxes.

These serve the purpose of long-term care. On the other hand, you cannot change an irrevocable trust once established. Contact your estate-planning attorney to learn which trust is best for you.

In the case of marital trusts, the estate tax exemption amount doubles the threshold amount. Unmarried women must pay special attention to federal estate tax laws and amounts, as there will be no exemptions in their trust.

There is a charitable remainder trust for unmarried women with limited funds or small businesses. It offers estate tax exemptions and helps provide for you for a set period. Any remainder goes to the charity of the trustee’s choosing. 

Power of Attorney

Power of attorney is for your financial and business concerns. A power of attorney takes care of all your business and financial matters if you cannot do so by yourself. Any woman’s estate plan, whether married or unmarried, must contain power of attorney. You can give power of attorney to a person of trust and capacity. That person will be in charge of taking care of:

• Bill payments
• Smooth running and management of your business
• Accounts management
• Buying or selling of commercial or rental property
• Business benefit application
• Setting a certain amount each month for your dependents

You can also transfer power of attorney to your adult children. Your power of attorney can also include the transference of ownership of your business. If you have trouble managing your business, suffer from an illness, or go off the radar under any circumstances. 

Prenuptial Agreement

A prenuptial agreement ensures the safety of your business and personal assets in the event of divorce. Draw up a mutual prenuptial agreement represented separately by the council months before your marriage. Doing this will ensure the safety of your joint and separate assets and control over your business. Deciding the distribution of business effects in the event of a divorce will make the divorce process smoother. 

Additionally, if you intend to make your spouse a partner in your business, strategically design a course of action in the event of divorce. Ensure you have a controlling share in the business to avoid hassle during divorce proceedings. Both parties must mutually agree on any prenuptial clause before signing. 

Know Your Team of Advisors

An accomplished business calls for managing your finances effectively. Have a company lawyer, a financial or estate advisor, wealth manager, and insurance agent on board. Consult them regarding buying policies, strategizing estate wealth planning, and doing your taxes. 

Keep your spouse and adult children up-to-date with financial planning. In case of any sudden financial responsibilities, they should be ready to take care of business matters.

Your team can also help clarify the power of attorneys to your family. In addition, they can help provide reliable data collection agencies to store account passwords or any encrypted business data in a secure location.

Key Takeaways

Estate planning may be more vital for women than men as they have a longer lifespan. To ensure control and safety over your business, maintain a record of your wealth. Have a team of trusted financial advisors to help you manage and secure your wealth. An estate plan is a fundamental plan to organize regardless of your marital status, age, or the sum of your possessions.

Women must keep the five aforementioned key estate planning tips in mind. These include planning for your eventual passing with a definite idea of how your shares and agreements will be settled. Then, purchase a life insurance policy to safeguard the interests of your spouse and children. Set up a trust to include your business assets. Plan for transferring power of attorney if you cannot manage your business. Draft and sign a prenuptial agreement to secure your business further and ensure control after divorce. 

These tips will help ensure safety and control over your business.

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