Many entrepreneurs find their lives consumed by their businesses. With a laser focus on their goals, some of the most successful people in business forget to create an estate plan. While your business might be your legacy, all will be for naught without an estate plan in place. That is especially true in 2022. Do NOT leave your life’s work at risk of being torn apart or entirely lost after you pass. Consider the following estate planning factors to ensure that does not happen:
Many entrepreneurs are true philanthropists at heart. They want to ensure their legacy is as much about their charitable efforts as their innovations. For the first time since 2018, you can gift an organization or an individual up to $16,000 without the need to fill out a gift tax form. Married couples can double that amount without having to fill out Form 709. The reason for the change? You guessed it: inflation.
Federal estate and gift tax exemptions also increased in 2022. A person may gift up to $12,060,000 tax-free over the course of their lifetime. Even if you decide to go above and beyond the $16,000 annual limitation, you will still only owe taxes if you have given more than $12,060,000 in total lifetime gifts. This is excellent news for anyone hoping to put their hard-earned dollars to good work without excessive taxation.
Cryptocurrency and non-fungible tokens have grabbed countless headlines in 2022. If your business has invested in digital assets, you will want to include them in your estate plans. In most cases, NFTs can only be accessed using a personal key or password. If you do not have a way to pass this information on to your beneficiaries, your estate may lose access to them altogether.
It is also worth considering what information you would like to make available to your heirs, since a blanket approach may not be suitable for your estate plan. Instead, carefully weigh which digital assets you would like to be accessible to fiduciaries – you will want to spell out precisely how and when NFTs should be transferred to beneficiaries.
Digital assets are relatively new, but they are evolving fast. While blockchain security is secure, it is designed to prevent forgery, not theft. Digital art marketplace users have reported thousands of dollars of NFT art stolen from their accounts. Should a hacker steal your NFT and resell it, the blockchain will record the sale irreversibly. It may take the law some time to catch up to new trends, so you will want to be cautious. Factoring NFTs into your estate plan will be keeping abreast of developments in technology, security, and legislation surrounding the transfer of digital assets.
Succession planning has become all the rage in the wake of HBO’s hit show “Succession.” Such a plan allows for a seamless transition of business after an entrepreneur’s passing. A comprehensive plan accounts for new ownership, managerial duties, and other important details like asset inventories. They outline how ownership should be transferred, whether employees should be hired, fired, or promoted, and shed light on how disputes should be settled. Going without a succession plan in 2022 is, simply put, a bad idea.
The Small Business Association offers some guidance on the creation of basic succession plans, but it is best to seek the guidance of a professional estate planning attorney. An experienced professional can help you create a plan that reflects your goals, priorities, and values. Your business is truly a legacy, and without a succession plan in place, you put that legacy at risk.
You have worked hard to build your business. Take time to ensure its longevity by creating an estate plan. Fail to do so, and you may leave your friends, family, and associates scrambling to keep the organization afloat. This only leads to further disputes and problems – an ounce of prevention really is worth a pound of cure.
To ensure your estate plans are in line with your goals regarding gift tax, digital assets, and business succession, schedule online or call our team today at (281) 218-0880.
Kimberly Hegwood is the Managing Attorney of Your Legacy Legal Care, a Houston estate planning law firm. With more than 25 years of experience practicing law in Texas, she represents clients in a wide range of legal matters, including elder law, asset protection, estate planning, Medicaid crisis planning, probate, guardianship, and other estate planning practice areas.
Kimberly received her Juris Doctor from the South Texas College of Law and is a member of the State Bar of Texas.
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