David Den Dooven contributes to dbusiness’ “Grow Personal or Business Wealth with the Right Advice” feature. He offers perspective on the importance of estate planning, even in the early days of a start-up enterprise’s success. You can read the original post here.
Q: My friend and I are in the early stages of our startup. Do we really need to worry about estate planning?
A: Once you and your business partner (“Partner”) have gone from startup to feeling like you’ve “made it” and can finally take a breath, the unexpected can happen. Say you get the call that your Partner has passed away. You’ll think back to when your friend, the attorney, recommended you and your Partner enter into a buy-sell agreement, and that each of you have a will and trust — and you ignored the advice because you thought you could simply buy out the other’s interest from the surviving spouse.
Unfortunately, it’s not that simple. A probate estate may need to be established to deal with your Partner’s ownership interest. If there’s no will or trust, parents and/or children may also have a claim — and their interests may not align with your Partner’s spouse. You may find yourself negotiating various details (e.g., purchase price, timing) with these parties, all while trying to manage the business.
These issues could likely be avoided with a proper estate plan, in conjunction with a buy-sell agreement for the business. A little planning up front can go a long way toward mitigating headaches and heartache later on.