You started your business or creative venture with a clear vision of the end-goal . . . or did you? If you haven’t provided for your life’s work in your estate plan but fantasize about leaving it as an entrepreneurial or artrepreneurial legacy for your kids (and their kids’ kids), your dream might just become a nightmare for your heirs—and for your business partners, employees and clients, too.
Want to be sure your family has rightful ownership of your creative assets, company, or your stake in them when the time comes? Avoid a nightmare with comprehensive estate plan that includes these key five elements:
1. Establish Living Trusts
If you think a will is all you need to sufficiently protect your business and creative assets, think again. A will still requires your family to go to court in the event something happens to you; a living trust keeps the court out! While a will allocates the division of your business and intellectual assets after your death, a living trust is a distinct legal entity that effectively owns your business, creative venture, or your shares of the same, WITHOUT any tax consequences or change of control (until after your incapacity or death, of course).
Unlike a will, assets transferred into and owned by a living trust are NOT subject to probate. This means not only will you spare your heirs the hassles of probate, your business affairs will remain PRIVATE; your assets will transfer to your family and loved ones immediately upon your death in the privacy of your attorney’s office; your designated successor can take control of your entrepreneurial or creative endeavors immediately; and you save those you care about from estate taxes, court costs, and legal fees.
2. Get Life Insurance
Unless your business generates significant cash that will continue uninterrupted upon your incapacity or death, those revenues might not be enough to provide for your family financially. If you want a safety net for your spouse, kids, creative and business partners, employees and clients, be sure to invest in life insurance sufficient to ensure your business remains liquid for those who are left behind.
3. Draft Buy-Sell Agreements
Do you share your business or creative interest with multiple owners? Then you probably need a buy-sell agreement. Buy-sell agreements guarantee that when certain circumstances occur—such as the death or disability of a partner—either the remaining owners have the right to purchase your shares of the business OR your shares pass directly to your heirs.
A buy-sell agreement ensures your beneficiaries aren’t stuck owning a business they don’t want and can’t sell, while at the same time protecting your business partners from being forced to deal with new owners they don’t like or just didn’t contemplate. Whew!
4. Design a Succession Plan
If you hope to leave control of your company or artrepreneurial empire to your family, a business succession plan is a “must have” to ensure your heirs know how to successfully run the dream business you created or how to sell it to the right people for the right price without you.
And what if you want one specific family member, trusted employee, or incredible person to run your empire when you’re no longer able? You can designate that person by name in the succession plan with instructions on exactly how and when the business will be transferred to him or her. If you want your peeps to sell the farm, a business succession plan is your opportunity to plan that NOW.
5. Properly Transfer Intellectual Assets
Whether you are a creative with visual, written, or musical work or a business owner with policies, procedures, and systems that you treat as trade secrets, if you don’t register those materials with the U.S. Copyright office and ensure that your living trust or entity (depending on your goals) owns those rights, your family, team, and clients may not be able to leverage your genius and hard work when you are no longer around. Properly transferring these rights is essential to your legacy.
To protect YOUR business or creative venture with a solid estate and succession plan, call Thrive LawTM today to set up a planning meeting with our fantastic legal team. We’ll guide you through the process, giving you peace of mind that your family, employees, and clients will be taken care of according to your wishes.
This article is an educational service of Thrive LawTM, a business law boutique. It does not constitute legal advice or imply an attorney client relationship. We offer a full spectrum of legal services for businesses and are equipped to help you make the wisest choices about your business dealings while you’re alive and well or in the event of your incapacity or death. We also offer a Healthy Business & Creative Checkup for ongoing ventures, as well as outsourced general counsel plans for businesses who need a legal team on speed dial. Contact us today to schedule: 727.300.1990 or firstname.lastname@example.org. We cannot wait to meet you!