With decades of experience, turn to a trusted team for your estate planning, estate administration and probate litigation needs.

An estate plan may require a business succession strategy

On Behalf of | Sep 7, 2021 | Estate Planning |

Business owners in New Jersey may include a succession strategy as part of their estate planning documents. As noted by SmartAsset.com, dying without a will in the Garden State generally means a surviving spouse receives an individual’s property, which may include business interests.

Absent a will, a surviving spouse, children or parents may find ownership of a business divided between them. New Jersey’s laws generally allow the probate court to distribute 25% of a business to an individual’s surviving parents or children and the remainder to a surviving spouse.

Unplanned ownership may harm a business

Without a spouse, children or parents, a deceased individual’s sibling or closest living relative may take ownership of a business. When surviving heirs control an enterprise, however, they may not have the experience required to effectively manage its operations. Positive relationships built over time with financial institutions, customers and suppliers may become compromised. A lack of instructions in an estate plan regarding a business’s management could harm an enterprise that took years to build.

Planning for a qualified successor

Owners may avoid inadvertently causing damage to their businesses by proactively selecting and training a suitable successor. As reported by Kiplinger’s Small Business, a 64-year-old New Jersey small business owner sold his company to a long-term employee who was familiar with the operation. The well-chosen successor was able to make the purchase with a six-year payment arrangement.

An estate plan may include instructions for a successor who takes over a business if an owner becomes severely ill, injured or incapacitated. This may avoid potentially unqualified heirs taking control of a venture, a situation which could lead to a loss of customers, goodwill and revenue. A business succession strategy made before the owner’s death, however, may help provide for the enterprise’s longevity.