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Estate Planning for a Family Business

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Estate planning for your Naples family business is crucial for the success of your business and the continuation of your family’s income. It is easy to get overwhelmed with the day-to-day tasks of running a family business, but estate planning is not something you should put on the backburner. A significant majority of family businesses never make it to the second generation because of a lack of planning. If you own a family business in Naples, Florida, you should reach out to James R. Nici, a qualified estate planning attorney, as soon as possible.

Estate planning for a family business can be complicated and goes far beyond creating a will. Below are seven basic steps that you may need to take when estate planning for your business.

1. Draft a Will and Basic Estate Plan. In your will, you can state how you want your business interest and other property divided at your death. If you do not have a will, your property, including your business, will be distributed according to Florida’s intestate laws. Alternatively, you can place your business assets in a trust.

In addition to a will and trust, you should create a financial power of attorney and healthcare directive. In a financial power of attorney, you can appoint a trusted individual to manage your finances and undertake business transactions in the event you are incapacitated. In your healthcare directive, you can appoint another individual to make medical decisions on your behalf if you are incapacitated.

2. Plan for Tax Efficiencies. You and your attorney should discuss strategies to reduce your tax burden. Luckily, Florida does not have an inheritance or estate tax, so this is not a factor. Furthermore, the federal estate tax exemption is $12.06 million in 2022. Most small family business owners in Naples fall below this limit.

Even if inheritance and estate tax are not an issue for you, there are various other tax considerations still at play. For example, your attorney can explore different ways to tap into your retirement money for business without tax penalties.

3. Work Through Family Issues. One of the trickiest parts of estate planning for a family business is handling personal relationships and family dynamics. Your attorney can guide you through issues unique to family businesses, such as inheritance arrangements for children that are not active in the business and whether you want in-laws to receive ownership interest. Confronting and planning for these situations helps avoid intra-family fights that could put your business at risk.

4. Draft a Buy-Sell Agreement. Buy-sell agreements specify who can buy an owner’s share of a business, under what conditions, and at what price. It can help keep a family business in the hands of existing owners when one owner dies, becomes disabled, or otherwise leaves the business. These agreements can be structured in multiple ways. An attorney can create an agreement unique to your company.

5. Buy Life and Disability Insurance. Life insurance is critical for small business owners. The coverage will provide your family (or other named beneficiary) with a source of income when you die. It can also guarantee an income stream to your business so it can continue operating. Most Naples family business owners purchase a personal life and disability policy with your family as a beneficiary and a key person life and disability policy with the business as a beneficiary. Your attorney can help you determine what type and how much life and disability insurance to purchase.

6. Create a Business Succession Plan. A succession plan is a critical business planning document that specifies how you, your family, and your business will handle a transition in ownership. The plan can focus on who to keep the business running or prepare for its sale in your absence. Your attorney can ensure that your business succession plan is consistent with your other estate planning documents.

7. Update Your Estate Plan as Necessary. Once you have created your estate plan, it should be periodically reviewed to ensure that it is consistent with your current wishes and any changes to the law.

Call A Naples Estate Planning Lawyer

If you have questions about estate planning for a family business, you should contact Nici Law Firm. James R. Nici is an experienced Naples attorney with over 25 years of experience. He is well versed in these issues and can create an estate plan that fits your needs. Contact our office today at (239) 449-6150 or use our web form to set up a free consultation.

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