Estate Planning for Small Business Owners

rgv hispanic chamber of commerce, small business


Traveling Down the Ominous Road of Financial Planning

I stood there in awe as I watched friends and family enjoy our wedding. People were laughing, drinking, and having a good time celebrating our union. I took a drink from the 25-year-old scotch bottle my wife gifted me as a wedding day present and observed the varying ages of every couple in the room; from my wife’s cousin and her boyfriend who coincidentally caught the bouquet and garter. To ourselves, the newlyweds, then onto my in-laws who were married for 35 years, and lastly to one of my aunts who had recently suffered the loss of her husband a few days before our wedding. I looked at my wife as she greeted people with a smile from ear to ear and realized that one day she would lose me or I would lose her.

It was a sad thought to have on such a happy day, but I remembered something my father-in-law once told me on one of our private talks we had when my wife was shopping with her mom from afar. He said, “See that look, you’re the only one that can give her that look. Your goal should be to keep that look on her face every day. I’m handing her over to you. Protect her and the look.” It was then that I decided to travel down the ominous road of financial planning. Financial planners call this estate planning.

Why you need an estate plan

Estate planning is the process of planning for the management and distribution of one’s belongings not only for death but in the event of your incapacity. You are never too young to have some sort of estate plan. The common misconception is that if you don’t have millions of dollars, you don’t need one. Say that you have a successful, unmarried 26-year-old child who has bills to pay and becomes incapacitated, he or she needs someone to handle their financial affairs. Or maybe you’re a newlywed like myself, have a busy schedule, and are filing your tax return for the first time. Having powers of attorney to sign the prepared tax documents on each other’s behalf may be useful to keep from taking extra time off work.

Small business owners should have a will, a medical power of attorney, a durable power of attorney, and a directive to physicians in place. These documents should always be revisited when a major life change occurs such as marriage, the birth of a child, the death of an heir, etc. If these documents are not executed, you let the state you reside in decide how to divvy up your assets or appoint fiduciaries on your behalf. Keep in mind that your family is not made up of mind readers and everyone’s relationship with you is different so everyone will have an opinion of how things should be done in your incapacity or death unless your spell it out for them. Also, have a business succession plan in place to answer the difficult questions like, who will run the business after I die? Will it be sold? If so, for how much and how will it be divided? If you are an older business owner, these questions may pop up a few times whether it be asked by clients, potential buyers, or heirs.

Protect your family

As small business owners we sometimes get so caught up in planning for retirement, expanding our business, and /or figuring out our next move that we forget about protecting our families.

Life Insurance: There are many types of life insurance policies out there and I won’t cover them all in this brief article but having some sort of life insurance in place is important to your overall plan. As small business owners, we don’t have the luxury of an employer providing this benefit so there’s more legwork to do on our part. Being that I’m a young business owner, I have a bias towards Term Life Insurance. It offers the best bang for your buck coverage in comparison to a Whole Life Insurance policy. The cost depends largely on your age, health, and amount of coverage you request. In general, your coverage should be enough to cover your final expenses and liabilities such as car notes, mortgages, and large loans.

Disability Insurance: I can’t stress how much disability insurance is ignored by many. Statistically speaking, the younger you are the more likely you are to become disabled vs. dying. There are 2 types of disability policies, short-term and long-term. From a long-term protection standpoint, long-term disability insurance is a must have for anyone with 15-20 years of income to protect. This coverage is typically offered by an employer and covers 50%-60% of one’s salary; however, if you are self-employed like I am, seeking coverage falls on you. Not having the ability to earn an income if you’re a small business owner can definitely put a damper on your way of life.

The Bottom Line

The bottom line is if you are a small business owner, you should look at the overarching picture, not only from the business side, but also from a personal standpoint and see how the lack of an estate plan can affect you and your loved ones. You should always consult an estate planning attorney before implementing any strategies or techniques. You can download my free estate planning checklist here for guidance on things you should do when thinking about an estate plan.


MyLife Financial is a fee-only financial advisory firm providing objective and independent advice virtually. Our clients are busy professionals that face daunting questions of how today's financial decisions will affect their long-term financial success. Everything written is strictly for informational use only. Please seek the advice of your CPA, Attorney, or financial professional before implementing any strategies.

Want to know more about how a financial plan could help you? Click on the clock below to set up your next meeting. Thanks!


© 2016 MyLife Financial, LLC

#smallbusinessestateplanning #businesssuccessionplan #McAllenFinancialAdviser #EdinburgFinancialAdviser

Featured Posts
Recent Posts
Search By Tags
Follow Us
  • LinkedIn Social Icon
  • Facebook Basic Square
  • Twitter Basic Square
  • YouTube Social  Icon