If you have started a small business and seen success, then you may be aware that this business could help you build generational wealth. It’s a good idea to help teach your children to run your business and to get them involved in it in the future if they’re interested in being a part of the business’s future.
If you would like to pass your business on to your children, there are a few ways that you can plan for that to happen. You could opt to pass on the business during your lifetime or allow them to take over once you’ve passed away.
Giving away the family business
Many times, what happens in this scenario is that the business owner gifts the business to their children. By gifting the business to your kids, you could eliminate the need for them to pay taxes. Gifts that exceed $13,000 will be taxed, but you could consider gifting a portion of the business’s value each year until you reach the limit.
Another option that some people use is passing on the business in a will. It could be a good choice for you to pass on your business in your will if your children aren’t old enough to take over right now or if you want to stay at the helm until you pass away.
If you pass on your business this way, remember that you may leave your children with tax to pay. You should plan for that in your estate plan so that it doesn’t catch anyone off-guard.
Not passing on the business until after your death may help you plan for taxes related to the business, though. Some people plan for these taxes by taking out life insurance policies that cover the tax liability.
Passing on your business can be a tricky process
There are various options to help you pass on your business to your children, and not all of them will make sense for you or your business. It’s smart to go over different scenarios to determine what’s right for you based on your business’s size and value.