We don’t like to think about it, but we are all going to die someday. What will happen to your company after your death? The Hardest Decisions. For business owners, the business is often the largest (or only) valuable asset of the estate. Who should inherit the business? How much direct control should they have over the business? What if they are bad business people? What if they don’t want to continue the business? How important is continuing the business legacy? These are just some of the tough questions that must be answered. Trust is a Must. The death of the business owner is turmoil enough; that turmoil shouldn’t be prolonged by uncertainty in the probate administration of business assets. The business owner’s stock or membership interest should be titled in a revocable trust, so the successor trustee can start making business decisions immediately. Business-Minded Trustees. Your mother, father, brother or sister might make a great trustee when it comes to caring for your children, but you need a trustee who will be a savvy business owner like you. You can designate a special trustee or co-trustee specifically to handle the business assets. Now What? What should managers and employees do the day after the business owner dies? Have a written plan of action and make sure someone at the office knows where to find it. Especially important, make sure everyone knows who calls the shots. Insurance for Lost Keys. After the death of a business owner, business-as-usual is nearly impossible. Business performance could suffer for weeks, months, or longer while everyone figures out how to deal with the owner’s loss. In the meantime, bills still need to be paid. Making matters worse, the owner’s death could trigger defaults on credit lines and loans guaranteed by the owner. Company-owned key person life insurance can provide additional capital to help the business get back on stable footing. The Name on the Page. Many businesses rely on the qualification(s) or licensing of the owner in order to stay in business. What happens when the owner—and his or her qualification(s) or license(s)—dies? There may be a grace period to find another licensed person, but this differs from industry to industry. Stock Rich, Cash Poor. A valuable operating business can produce a large estate tax bill, but it might not generate the cash necessary to pay the IRS. The business-owning estate might be allowed to stretch out payment of the tax bill, but it will still be a drain of much-needed cash. Life insurance can provide cash to pay the estate taxes so the business can be left alone. How About a Discount? Generally, a business owned by one person has a greater taxable value than a business owned by several people. Dividing up the ownership of your business can result in discounts of as much as 40% for estate tax purposes. Gifts to family members, long-term grantor retained trusts, and installment sales to intentionally defective grantor trusts can all result in estate tax discounts. No Charity for S Corps. Business owners can use gifts to charitable remainder trusts to generate immediate income tax deductions and partially avoid capital gain taxes on a future sale of the business, but not if the business is an S corporation. The S corp rules prohibit stock ownership by a charitable remainder trust. The Next Generation. Who should inherit the business—a surviving spouse or children from a prior marriage? Often, the business owner wants the children to inherit the business, but the surviving spouse might exercise an elective share and take part of the stock. The business owner should consider having a prenuptial agreement to ensure that the business goes to the children.