Estate Planning for High-Net-Worth Business Owners

High-net-worth individuals have more assets – both physical and intellectual property – to arrange when it comes to estate planning. With so many details to look into, many business owners commit five small but impactful errors when it comes to their estate planning.

Every family and business is unique, which is why estate planning is so essential for high-net-worth individuals. Make sure your legacy is left behind the way you want it to be, and read on about the five mistakes to avoid while estate planning for business owners.

Five Mistakes to Avoid

Many high-net-worth business owners create an estate plan once and consider it solidified for their future. This is just one of the small errors that could cost these business owners much more time, energy, and even assets in the future.

If you are looking to preserve your legacy, business, and estate for your heirs once you’re gone, be sure to avoid these five mistakes below.

1. Outdated Wills

Wills should be updated every five years, but a true and innovative business owner should review major aspects of a will as regularly as annually. Major life and business changes mean that your assets and – potentially – beneficiaries can change from one month to the next.

The major events that call for a will review include marriage, divorce, birth, or death. You’ll also want to review your will if you made any major purchases, such as buying a new or additional home, expensive vehicles, or commercial real estate.

Wills should and could also change if you’ve recently acquired a new investment, or if your business has experienced a merger or acquisition. Any major change in your assets should be reflected in your estate’s will.

Unless your separate investments have their own beneficiary forms, your will determines who gets what when you die, and how. Your will can also name estate executors, guardians for your children, Power of Attorney, and Health Care Proxies with the appropriate documentation.

2. Lacking Financial Strategies

All business owners know that a will determines how your assets are distributed, but, unfortunately, many high-net-worth individuals do not consider the different strategies one could implement apart from their will.

If something were to happen to you, you’d surely want to protect your family, loved ones, business partners, and your business as a whole. Simply distributing your assets is not enough.

An adequate estate plan for someone in this position includes more than just a will. You could also consider delegating a holding company in addition to your operating company. A holding company is non-active, and it can help protect your assets against creditors, as they cannot generally go after assets held by a holding company.

Another consideration is family trust planning. This simplifies the control of your business once you die, giving control to one trustee who then manages the income and capital of your business. Family trusts can also fix future estate tax liabilities through estate freezes while transferring future business values to trust beneficiaries.

Purchasing the correct life insurance policy is another strategy that helps avoid taxes while providing a financial cushion for your beneficiaries. Sim Gakhar, certified investments advisor and insurance agent, can also provide you with additional wealth transfer, tax reduction, and planned giving strategies to strengthen your estate plan.

3. Delegating Estate Planning to Someone Else

High-net-worth individuals have plenty on their plate, so it’s common for them to delegate some of their financial planning to professionals. Many business owners turn to investment advisors and insurance agent professionals like Sim Gakhar. Even though her services are needed, Sim knows there is more to estate planning than just hiring a professional and calling it a day.

Different advisors and professionals working on an estate plan need to ensure they are collaborating. This means getting a team to work together, developing a plan for the business owner’s assets, while communicating with said owner along the way.

This team can and should include an investments advisor and insurance agent like Sim, as well as a lawyer, accountant, and other applicable business succession advisors.

4. Lacking Communication with Key Players

Another mistake many business owners make is not including their loved ones in their estate planning process because of the discomfort around such conversations. No one likes to think about their morality or death, but the earlier you think about it, the better off your family can be when it happens.

While you may think it best to ignore the subject now, this means you’re potentially leaving your loved ones with little guidance and comfort when you do pass away. Sit down with those mentioned in your will to relay exactly what your wishes are once you’re gone.

5. Ignoring Testamentary Trust Options

Testamentary trusts are trusts within a will. A trustee is named and given the freedom to oversee the deceased’s assets in coordination with the trust’s directives.

Trustees are often not family members, which makes them more likely to make decisions rationally and without interpersonal bias.

The difference between an estate executor and a trustee is that a trustee is required to administer a trust to beneficiaries according to a legal agreement. The executor, on the other hand, distributes assets according to a will. Generally speaking, a trust is more much structured, layered, and complicated than a will. This may be the best option for business owners with many facets to cover upon their death.

The designated trustee, in this case, may invest trust assets, file tax returns, and distribute the assets to the surviving beneficiaries. These trusts offer opportunities around income tax savings as well – be sure to reach out to Sim Gakhar’s office for more information.

Creating an Optimal Estate Plan

Estate planning for high-net-worth businesses and assets requires a variety of professionals to ensure all finances have been accounted for. If you’re looking to assemble a team of professionals who will not only plan for you but with you, be sure to reach out to Sim Gakhar. With her extensive investments and insurance knowledge, Sim is a vital part of any estate planning team for high-net-worth individuals across Ontario.