On behalf of Kadish & Associates Law Group posted in Estate Planning For Business Owners on Saturday, January 11, 2020.
As a small business owner, you likely know that you need to have a will and a succession plan as part of your estate plan. What you might not realize is that you also need to have suitable insurance policies in place so that those left behind have a source of income.
You might already know that you need to have a life insurance policy for your family. You will list a family member as the beneficiary, and they will receive the funds from the policy when you pass away. This doesn’t have to be covered in your estate plan because you name the beneficiary when you establish the policy.
On top of the personal life insurance policy, you might also need to consider starting a key person life insurance policy, which would have the business as the beneficiary. This can provide a vital source of income while the company begins the process of running without you there.
Think carefully about how you handle these policies. You might consider placing a life insurance policy in a special trust that is irrevocable. The trustee will administer the trust, including investing the proceeds. This might be beneficial if you need to support multiple individuals with one trust, such as if you have two or more older children who you plan to help.
There are special considerations that small business owners might need to consider prior to enacting a plan. Be sure to work closely with an estate planning attorney who is familiar with the needs of entrepreneurs, so your family members and company are protected if you pass away suddenly.