Estate planning as a business-owning parent requires extra consideration. That business may make up a significant part of your estate.
Passing it on is not as simple as passing on money or real estate. Here are three options you might want to consider for the business.
1. Have the children run it
Keeping the family business going was traditionally a duty that fell to the oldest child. If they didn’t want it, that could be a source of conflict between them and their parents. One study suggests that this is often no longer the case and that 52% of business owners do not even want their children to take it on.
They cite various reasons, such as being unsure the kids would do a good job, fearing that having it handed to them would not be as beneficial to the children as forging their own path in life. As has always been the case, many kids also have no interest in following in their parents’ footsteps.
2. Have someone run it for the children
Some business owners have a third party run the business after them, on behalf of the children. They may have worked with the person who succeeds them for some time and trust them to run the company well, providing a steady income for their family for years to come. Others just have someone take charge until one of the children is old enough to take the reins.
3. Sell the business
Selling the business is another popular option. It can simplify the estate planning process, especially where more than one child is involved. The profits from the sale can be shared in cash between the children, allowing them to use the money to pursue their own goals — perhaps starting their own business with it or investing it while they pursue a career working for someone else.
With such diverse options available, it is wise to talk to your children to gauge their opinion on the matter. Legal guidance can help you learn more about the legal side of the various options available.
