Family-Owned Businesses & Farms
For many Americans, owning a family business or farm remains an important part of the American dream. Achieving that dream comes with a sense of pride and accomplishment. It also places a heightened sense of importance on the creation of a comprehensive estate plan because the family business or farm you likely hope to pass on to future generations could leave your estate vulnerable upon your death or incapacity. At The Law Offices of Kirk Halpin & Associates, P.A., we understand the challenges faced by family owned businesses and farms and are committed to helping you protect and preserve what you have devoted your lifetime to building and nurturing.
Estate Planning Challenges for the Family Owned Business or Farm
Most estates face some type of challenge; however, when a family owned business or farm is involved those challenges can be disastrous to your overall estate if you do not address them carefully within your plan. One of the most common challenges is the tendency for a family business or farm to lack sufficient liquidity. The books may show that the business or farm is worth a small fortune; however, the majority of that worth may be tied up in inventory, land, equipment, or crops.
Being asset rich and cash poor may not be problematic while you are alive but it certainly will be a problem when it comes time to probate your estate. Every taxpayer’s estate is potentially subject to federal gift and estate taxes at the time of death. Those taxes are calculated based on the total value of the decedent’s estate assets at the time of death. If your estate does owe gift and estate taxes, but lacks sufficient liquid assets to satisfy the debt, your Executor could be forced to sell vital business assets to raise the necessary cash. That, in turn, could threaten the future of your family business or farm.
How Can You Protect Your Family Owned Business or Farm?
The key to protecting your family owned business or farm both now and after you are gone is careful estate planning. Yu have undoubtedly invested a considerable amount of time and resources into building up your business to the point where it is successful. Whether you hope to pass on the business to the next generation, or plan to leave the value of your interest in the business to your loved ones when you are gone, care must be taken to ensure that the business continues to thrive during your lifetime and makes it through the probate process in one piece.
Your business or farm has obviously flourished under your leadership; however, what will happen to the business if something happens to you? If you were to become incapacitated tomorrow as a result of a catastrophic accident, would your business survive? Incorporating an incapacity planning component into your estate plan ensures that someone of your choosing is prepared to step in and keep the enterprise running smoothly in the event of your incapacity.
As you may already know, a significant percentage of small business fail to make a successful transition to the next generation following the death of the family patriarch or matriarch. To ensure that your family owned business or farm does not become a statistic, a business succession planning component should be included in your comprehensive estate plan. As part of your business succession plan you may decide to create a Family Limited Partnership which allows you to pass down your interest in the business slowly over time while maintaining the ability to run the day to day operations until you are ready to turn over the helm. On the other hand, if your plan is to sell your business if something happens to you, a Buy-Sell agreement might be a beneficial addition to your overall plan. A Buy-Sell agreement guarantees that you (or your loved ones) will receive the fair market value of your interest in the business or farm in the event it must be sold at a later date.
At The Law Offices of Kirk Halpin & Associates, P.A., we ae committed to helping you protect your family owned business or farm both while you are alive and after you are gone. Contact the team today by calling 410-531-1700 or fill out our online contact form so we can help you get started today.