If you don't have a will or your will is outdated, you certainly aren't alone, since an estimated 63 percent of Americans do not currently have one, and of those who do, about 9 percent have a will that is not up to date. But if you don't have a will, then you need one, especially if you also have a small business.
Why a Will Is Important
Having a will means that you decide who gets your property when you die; not having a will means your state's laws decide. The state laws may be against what you would have wished, and processing of your estate through the probate system can significantly delay the distribution and settling of your estate. If you have a business, then all significant business decisions would need to be approved by the probate courts or assigned administrator, which could cause devastating delays to business operations.
Minimum Requirements for a Valid Will
- The person writing the will (known as the "testator") is at least 18 years old and of sound mind;
- A statement that the document is intended to be the testator's will;
- At least one provision that disposes of property or appoints a guardian for a minor child;
- The appointment of an executor, someone granted legal responsibility to take care of the testator's remaining financial obligations;
- The signatures of the testator and at least two witnesses, preferably who are not beneficiaries of the will; and
- The will is typed, computer-printed or handwritten.
Special Considerations for Business Owners
- After your death, do you want the business to continue?
- Who do you want to run the business?
- Does that person want to run the business or have the skills to do so?
- Do you want one child running the business with the other sharing in the profits?
- Do you have partners to consider?
- What's the best way to transfer ownership?
- Key Man (or Life) Insurance: Either the business takes out an insurance policy on each owner's life or a cross-purchase arrangement occurs in which each partner takes out life insurance for each other, using the proceeds to purchase your share when you die. This ensures the company avoids a drain on the business's cash and allows for an injection of cash in order to fulfill a buy/sell agreement.
- Buy/Sell Agreement: This agreement can be automatically triggered upon your death and provide that your interest in the business can be acquired from your estate, leaving your beneficiaries with the proceeds from the sale. This allows your business to continue running smoothly, with the same people in control, except for you.
- Revisit your will every five years at least, since tax laws and personal circumstances change. Review even sooner if you experience any significant life event, like divorce, or if your business' operations or ownership shifts.
- You might also consider appointing an executor who is knowledgeable about your industry. Such an executor would have the knowledge and expertise to make better informed decisions about your business assets. For example if your business involves royalties or publishing rights, then an expert in the field probably would better manage those aspects of your estate once you are gone.
- Once you make your will, secure the original copy somewhere safe but accessible upon your death.