Successful entrepreneurs are great at turning their visions into vibrant, thriving businesses. They’re nimble in the marketplace and aren’t afraid to take chances. They’re good at many things – but estate planning often isn’t one of them.

In a recent survey of 500 business owners by Entrepreneur, 80 percent didn’t have a power of attorney, only 24 percent had a will, 13 percent had a trust – and 65 percent had no planning documents at all. To us, these numbers are startling.

As an advisor, we are well aware that insurance, savings, and “fingers crossed” are no way to protect what you have successfully created.

The basics

You built and nurtured your business for several years, but you know how fragile it can be. Your family’s success and prosperity depend on how long you can sustain the business. Insurance and savings are a good start, but even the most well-protected businesses can be exposed to risk if it doesn’t have core planning documents.

A last will and testament, revocable trust, durable financial power of attorney, health care power of attorney, and other essential documents risk being ignored if you fail to see the value they represent. Having these pieces in place becomes more than just important; they become essential.

Although insurance can cover you for unforeseen events like medical emergencies, only estate planning prepares your company for the absolute worst-case scenarios.

Getting started

The most basic estate planning document, a will, allows you to specify how your assets will be handled after death, and to whom they should be transferred, but that is only the beginning.

You should have a durable financial power of attorney. You’re in charge – until you need surgery that puts you out of commission for a few months. Without a clear plan in place, questions start piling up. Who pays the rent? Who does business with your clients? Who accesses your bank accounts, and how?

To keep your business and affairs private, you’ll want to set up a revocable trust. If you only have a will, it must pass through probate, and it can be problematic for a small business that needs to protect sensitive information. Moreover, the cost and delays associated with probate can disrupt the business’s continuity. A trust can be modified and assets can be moved in and out to accommodate business exigencies, and it will keep your affairs private.

Other considerations

You need to set up a succession plan. At the core of this plan is a simple question: What happens to the business when you are no longer around, whether that’s through early retirement, incapacitation or death? Your succession plan can also cover what to do if you encounter financial hardship or transfer ownership to someone else.

A good succession plan clarifies how ownership will be transferred, establishes rules for hiring, compensating and promoting family members, and specifies how disputes will be resolved. The most important issue here is putting a plan to paper and defining “succession” as you see it.

If you have partners aside from family members, set up a buy-sell agreement. This document is a mechanism for redistributing an owner’s interest in the event of death or disability. Such an agreement is also helpful if an owner declares bankruptcy or is going through a divorce.

Buy-sell agreements include cross-purchase and stock-redemption agreements that allow the remaining owners to redeem your stake in the business. You want your beneficiaries to be fairly compensated, so this agreement will also specify how the value of the business will be determined: the asset, income, or market approach.

Constantly changing tax laws can completely throw off your plans, so if your plan is more than five years old, it’s time to review it. You’re likely to miss taking full advantage of all available new estate tax opportunities.

Proper estate and financial planning will help ease your mind and allow you to focus on the most important thing: running your business.

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