Estate planning is not a one-size-fits-all endeavor, and this is one of the reasons why it is so important to engage the services of an estate planning attorney. There are those who feel as though all you have to do is draw up a last will and you are finished. There are websites on the Internet that would have you believe that doing so is as simple as filling in the blanks on a generic template. But the reality is that each individual is different, each situation is different, and each family is different. Thinking you can fit into a one size fits all estate plan is a mistake. Estate planning attorneys provide you with personalized service tailored to your specific needs. Do-it-yourself websites fail to tell you that.
This having been said, let’s take a glance at succession planning for small business partners. If you are a partner in a small business and you pass away and leave your share to your family members, how will they liquidate it and how would this affect your partners who are left behind? Do they want your family members as their partners? If your family sold your share to the highest bidder the buyer may not be someone that your partners feel comfortable with. And of course if one of your partners died and the shoe was on the other foot you may feel the same way.
Buy-sell agreements are an efficient solution to this rather delicate situation. There are two different types of buy-sell agreements that are most commonly used: the cross-purchase plan and the entity plan. With the cross purchase plan the partners take out insurance policies on one another, and when one of them dies the combined proceeds are used to purchase that share from the family of the deceased. Under the entity plan the business entity itself buys insurance on all the partners and when one of them passes away the insurance benefit is used to buy that share from the estate of the deceased partner.
An agreement must be reached by all of the partners that is legally binding, and of course this is something that requires the expertise of an estate planning attorney. So, if you are interested in exploring a buy-sell agreement further simply get in touch with an estate planning lawyer who has experience with small business succession planning.