One of the proudest accomplishments of many Washington residents is operating a successful family business. Many entrepreneurs have built businesses over the years that they wish to leave to the family in hopes the tradition will continue as a family legacy. However, just as in any family with significant sibling rivalries, a smooth transition is not always the case when business ownership is not addressed by the primary owner before the unavoidable event of death occurs. So how can a business owner ensure their wishes are observed after passing? Well, the answer is by crafting an effective estate plan that makes no mistake concerning the business operation as time goes on.
Include the assets in a will
One problem with a family business is that the business itself cannot be transferred as an inheritance in Washington if it is a sole proprietorship of a senior family member. If it is a partnership, the percentage owned by the primary party establishing the will can be designated for inheritance. The assets can be inherited a sole proprietorship, but it is incumbent on the inheritor to reestablish the operation. This is a common method of transferring a family business as part of estate planning.
Include the business in a living trust
Establishing a living trust is also an effective method of ensuring the family business will continue after death. This estate planning action can also help guard against a family member contesting a will regarding asset inheritance. The designated trustee is the actual owner after the fact, but the primary owner can still maintain management authority until their passing. This can also help in avoiding a probate vulnerability for the business financial accounts when crafted by an estate planning adviser.
These are just a few legal steps that can be taken to ensure a family business continues in some format after the principal owner passes away. Many family businesses are actually co-owned by siblings or relatives, which means that each partner owns their own stake in the business that can be passed on to a particular member or members of their lineage. Each situation is unique, and there are alternatives for each case because of those factors.