Estate planning basics for founders and entrepreneurs

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When you’re wearing many hats as you manage the operations of your startup, there’s hardly any time to stop and think about what if things go catastrophically wrong. You probably don’t consider the consequences. If you die suddenly, leaving the enterprise you created so much blood, sweat and tears without a leader.

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It’s so rare that we think what happens after We pass away – when state courts assign a business to an unprepared family member or settle a business property settlement for months or years until your property is settled.

Unfortunately, without an estate plan, these scenarios are very likely to happen. I cannot stress enough how important it is for startup founders and business owners to have a plan. It not only protects your assets – it keeps your inheritance intact.

It may sound a bit vague, but having an estate plan will put your mind at ease.


We often hear about very real consequences when business owners die without an estate plan that legally sets out their wishes. Exactly a year ago, Tony Hsieh, the former CEO of Zappos, died in the fire at 46. Earlier, he retired with an estimated net worth of $840 million, but his family has since announced that he died intestate,

Now they are trying desperately to file for access to the accounts and assets of the former CEO, but to no avail. And what makes the matter even more tragic is that Hsieh had a plethora of charitable interests and undoubtedly wanted to donate some of his wealth upon his death.

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A recent survey by found that 62% Americans have no estate plan. However, 32% of youth aged 18 to 34 say they have settled an estate plan because of the pandemic. In addition, 21% of those in that group said they made a plan specifically because they or someone they knew had COVID-19.

We all want to build businesses that are timeless and will last for decades, so you should make sure that your business is in good hands no matter what happens. With COVID-19 bringing estate planning into sharp focus, let’s look at what you can do to ensure stress-free planning.

Get your documents in order

For starters, any startup owner needs to look at the documents required for an estate plan.

Every adult in the US must have a medical and financial power of attorney and a will. Medical and financial power of attorney are documents that empower someone whom you trust to make decisions for you during your life if you become unable to lead your business. If none of this is organized and you become incapacitated or die, the kingdom comes and decides for you, no matter what you chose.

In addition to the documents you need for an estate plan (power of attorney, health proxy and a will), it’s also worth considering creating a living trust with all of your assets and the “put-over will” associated with it. This. This means that in the event of an untimely death, distribution of your assets to the beneficiaries is a much easier process because the courts are not required to take steps to grant executor rights.

In the case of a sole proprietorship, if you die, the business can easily be dissolved depending on your state’s intestacy laws. Or, the courts may grant a sole proprietorship to your spouse or other surviving family members, which presents additional issues.

For example, suppose a marriage was on the rocks to the point where one party was filing for divorce, but also had a very successful business and died suddenly. In that case, the spouse may inherit the company, which would certainly not be in the interest of the deceased.

Estate planning services can tell you about the different elements needed for each document. For example, it may refer to distributing assets to your beneficiaries or appointing a guardian for your children.

Once this is done, the documents will need to be notarized, and in the case of a will or power of attorney, you will need a witness to appear. The final step is uploading them to a digital portal – some companies may even offer 24/7 access.

ever-evolving situation

An estate plan needs to be adjusted throughout your life, especially if you own a growing startup that could become a major player in your field later down the line. Ideally, you’ll update an estate plan annually, around the time the tax return is due, but depending on the state of your business, the situation can become too liquid.

It’s possible that your business assets gain value rapidly, or you decide you want to take a different approach to your succession planning (anyone who’s seen the TV drama “Succession” knows how complicated it can be. could).

You have to decide who you trust to handle your company if something happens to you. It’s not just about having an estate plan that expresses your wishes — it’s almost equally important to communicate this with a written succession plan.

HBR estimates that Company valuation and investor returns will be 20% to 25% higher with better succession planning, which should be coordinated with your will to avoid the possibility of conflicting rights to any of your assets. Ideally, you want to give this person as much notice as possible so they are prepared for your death and not spend unnecessary time and money hiring an attorney or filling out paperwork.

It’s also worth noting that when it comes to apportioning the value of your property, the appraisal can change, which is why it’s important to update your estate plan.

For example, you may decide to donate a percentage of your net worth to a church, but if the value of your assets increases over the years, the amount may be much more than you think. Likewise, if you offer a significant cash value to a particular party, and the value of your property decreases, they may be receiving much more than they are comfortable with giving to you.

Although we have discussed estate planning from the position of high-net-worth individuals, and some startups may not consider themselves at this stage right now, it should be a consideration for the future. By January 2022, up to $3.5 million Your net worth will not be taxed by the union after your death.

However, amounts in excess of this will be taxed at a federal estate tax rate of up to 40%. Therefore, if a successful founder passes away without an estate plan, they could leave both legal difficulties for their family and their estate losing a considerable amount to federal tax.

It may sound a bit vague, but having an estate plan will put your mind at ease.

I do not want to be afraid; Instead, I want to highlight the costly and harmful effects of when something happens and you don’t have an estate plan. Startup owners can be forgiven for not considering estate planning first, as leaders are often working nonstop to get their business off the ground, but many down the line don’t take the time to get to the top of it. There may be problems.

Taking these steps and being mindful of the precautions outlined above won’t cause the worst stress ever for you and your family.

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