Tooele Transcript Bulletin – News in Tooele, Utah

May 24, 2005
Small business owners have unique estate planning needs

Small business owners have many financial needs that may be different or more complex than those experienced by the average investor. In addition, as a small business owner, you may have special estate planning needs that should be considered when putting together your comprehensive estate plan. Some of these issues may be difficult to think about, but you may have some business, family and estate tax issues that should be addressed. Here are some of the considerations you should keep in mind as you develop your estate plan.

Operational efficiencies.

Every business is different – some owners are indispensable while others have businesses that could run pretty well without them. Regardless of the situation, it is vital to develop a plan to address these issues should they occur. You should also consider how your disability or death would affect the business and who would make key decisions in your absence.

Cash flow.

If you were unable to run your business, it is important to consider what that would do to your business’s profitability and value. If your cash flow would be affected, consider the role of key person life insurance or disability overhead insurance in your overall estate plan. These types of insurances will help ease the cash flows issues that may arise.


If your business has multiple owners, you may also want to think about what the effects of losing one of the owners would be. You should have an up to date buy-sell agreement for each owner funded with life insurance as well as a spelled out plan of what course of action would be taken should an owner die or become incapacitated.

Income for spouse.

If one or more of the business owners are married, would their spouse prefer to inherit the business or the value of the business? There are many different ways to structure your estate plan and your life insurance coverage depending on what you want to accomplish.

You should also discuss what involvement your spouse would have in the business, if any, should something happen to you.

Dividing assets.

You may have some of your children involved in the business and others who are not.

Some parents choose to make unequal distributions of assets in recognition of a child’s contributions to the business.

Other parents prefer an equal distribution of assets and families can create a plan that allows the children involved with the business to buy out the others. Because every business is unique, there is no single solution that works best, but it is crucial to have these decisions made early.

Federal estate tax.

Under current law, every individual can leave up to $1.5 million in assets to beneficiaries without incurring federal estate tax. A married couple can avoid tax on up to $3 million, but only if they plan properly.

The maximum estate tax rate has been reduced to its current level of 47 percent and it will continue to go down until it reaches 45 percent in 2007.

State estate tax.

Many states also impose estate taxes and these can be substantial. Even if federal estate taxes are repealed, state taxes may still be due so plan accordingly.

As you can see, developing a comprehensive estate plan is important for the benefit of your family and your business.

Your financial consultant, along with your accountant and lawyer, can certainly help you create a plan to address any potential future situations.

Kenyon Eastin resides in Stansbury Park. He is an Accredited Asset Management Specialist with A.G. Edwards & Sons, Inc. in the Sugarhouse office in Salt Lake City. (801) 487-7177. This article was provided by A.G. Edwards & Sons, Inc., Member SIPC.

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