As a business owner, you do everything to protect your company. However, many people need to realize that estate planning should be a part of that process.
While estate planning is not an exciting part of entrepreneurship, you need it to have a smooth transition of assets and minimize tax liabilities for beneficiaries. Here is everything you need to know about estate planning for business owners in Illinois.
Identifying and Valuing Assets
The first step in estate planning for business owners is to take stock of your assets. You will want to make an inventory of everything, such as:
- Real estate
- Intellectual property
- Stock and materials
Along with that, you will need to account for personal assets and liabilities. For those who co-own a business, you will want to determine the fair market value of your share. This valuation will impact how your business assets are distributed between your beneficiaries.
Set Objectives and Goals
Setting goals for your estate plan is the following step after identifying your assets. The financial requirements of your family, the welfare of your dependents, and any charity contributions you wish to make should all be taken into account.
Make sure the objectives are both clear and attainable. Be sure to keep your goals in mind when you draft your estate plan.
You must also create a timeline for your estate plan. A time frame will help you keep track of your plan, whether you’re considering an immediate wealth transfer or long-term planning.
Don’t forget about tax liabilities. Illinois imposes both federal and state estate laws. As a result, that can reduce the impact of the estate’s value.
While the federal estate tax threshold is high, Illinois has a lower tax exemption at $4 million. To determine what the beneficiaries will need to pay, you will have to assess the value of your estate.
With that information, you can find out what strategies minimize your tax liabilities. Some business owners establish revocable trusts or donate to charitable causes to reduce these taxes.
Key Estate Planning Tools and Strategies
Illinois business owners have several estate planning tools and strategies at their disposal.
A Last Will and Testament specifies how your property will be transferred in the event of your passing. You can:
- Name an executor
- Specify endowments to people or organizations
- Decide how distribution will be handled for any remaining assets
Revocable living trusts are useful for avoiding probate, protecting assets, and administering assets in the event of incapacity. For business owners, a revocable living trust may be beneficial. A trust will make sure that your designated beneficiaries receive those business interests without a costly and lengthy court process.
Buy-sell agreements are another important component of your estate plan, especially if you’re a business owner with partners. In the case of your death or incapacity, these agreements specify the terms and conditions for selling your company interests. Again, these documents guarantee a smooth transfer for your company.
LLCs or family limited partnerships also offer asset protection. They let you progressively transfer ownership while retaining ownership of your assets.
Finally, you do not want to forget about creating a business succession plan. Whether you plan to transfer ownership to a business partner, children, or another third party, these plans will ensure the process occurs without any problems. After your passing, your business can continue to operate without any questions about the company’s ownership.
Reach Out to Our Illinois Estate Planning Team
Estate planning for business owners in Illinois requires careful consideration on your behalf. By focusing on these plans, you can secure your legacy, minimize taxes, and ensure a smooth transition of your business and assets to your chosen beneficiaries.
Protect your financial future and your loved ones. Reach out to the estate planning attorneys at Bielski Chapman, LTD. To schedule a free 15-minute consultation, please contact our office at (312) 583-9430.