You’ve worked hard to build up your business, and you want it to continue to do well after you’re gone. You have multiple children, and you’re not sure exactly how to include your business in your estate plan in a way that is fair to all of them. Luckily, you have options.
If you were to pass away without a proper estate plan in place, a court would use Tennessee intestacy law to distribute your assets – including your business. If you’d rather have more control over where your assets go, and they’re distributed, then it’s essential that you establish a rock solid estate plan that is crystal clear as to where you want your business to go.
Know which of your children would run it best
Your first thought might be to have your business sold upon your death, and have the proceeds distributed among your children. That might be the best choice if you don’t think that any of your children would be interested in taking over the family business.
Often, only one child really expresses an interest in inheriting the family business. The other children might be happier with cash, or with your other assets. This is why it’s important to talk to your children before you establish your estate plan, in order to clarify expectations and understand their desires.
If this is the case, then be sure to offset the value of your business with your other assets for your other children. Nothing leads to animosity and in-fighting between siblings as much as when one receives a grossly disproportionate share of their parents’ estate. This can be a challenge if your business is far and away your most valuable asset.
Sharing value without splitting up the business
There is a creative way of sharing the value of the business among your children, while still leaving it to the child who would most like to run it. You could give each child a proportionate share of the business, and allow the child who will be running the business a chance to slowly buy out his siblings’ shares over time.
That way, that child will eventually become the sole owner, and their siblings can still get value out of the business. This also means that the owner sibling will not have to struggle to find the funds to buy out all of their siblings all at once.
Estate planning can be tricky business. It can be easy to make mistakes and to overlook warning signs. With creativity, and with the assistance of an experienced attorney, you can do your best to minimize the chances of your children fighting over your business – and other assets – while they are mourning your passing.