Estate planning for family business owners can be challenging. If you have questions, our firm can provide you with answers.
It is important to identify your long-term goals when you are running a family business. How will you be exiting the business? When will you retire? Which family members will continue to run the business after you are gone?
Advance planning is essential because your vision for the future will impact the way that you proceed in the present.
Business Continuation Agreements
When family members are partners in a business, business continuation agreements are utilized for estate planning purposes. The buy sell agreement is often used to provide a solution.
With the buy sell agreement called the cross purchase plan, the partners in the business take out life insurance policies on one another. The combined value of the proceeds will equal the value of a share of the business.
When one of the partners passes away, the insurance policy proceeds are used to purchase the share that was owned by the decedent from his or her estate.
Estate Tax Exposure
There are family businesses that are quite valuable. If the value of your business exceeds the amount of the federal estate tax exclusion or credit, you must take steps to gain estate tax efficiency.
The top rate of the federal estate tax is 40 percent. Your family could be forced to sell the business to pay the estate tax if you do not take the right steps in advance.
Campbell and Aptos California Family Business Planning Consultation
Advance planning is essential for family business owners. If you would like to put a plan in place, contact our firm to schedule a free Campbell and Aptos California family business planning consultation. You can reach us by phone at (408) 356-9200, and you can also request an appointment electronically through our website.