Californians who have minimal assets may find the estate planning process to be pretty straightforward and simple. Those who have significant assets, though, may find the matter much more complicated. This can be especially true for those who own a business. Deciding what to do with a small business can be difficult because an individual must consider not only financial ramifications of passing it down to one's heirs, but he or she also has to consider the emotional effect of his or her decision.
There are many ways to handle a business in an estate plan. One way is to simply sell it. By doing so, an individual can obtain cash that is more easily divisible amongst one's heirs. A similar option is to enter into a buy-sell agreement. Here, a business is transferred to another individual with the business owner retaining an interest. When a qualifying event occurs, such as death, the business owner's interest in the business is then purchased by the other party to the contract. The payment is made to the estate and dealt with accordingly.
While these options may seem pretty obvious, there are other legal maneuvers that can be made for the benefit of an estate and one's heirs. For example, there are certain types of irrevocable trusts that may allow one to transfer a small business to beneficiaries at a rate that will reduce certain taxes. Another option is to set up a survivor annuity where, in exchange for the business, payments are made to an individual and his or her spouse until both pass away.
These are just some of the many estate planning tactics to consider when dealing with a small business. The choices made during the estate planning process have very real consequences, which is why those engaging in this process need to ensure that they are fully informed before making any decisions that may have long-term ramifications.