Business Succession Planning Few people have more estate planning issues to deal with than the family business owner. The business may be the most valuable asset in the owner's estate. Yet, two out of three family owned businesses don't survive the first generation due to poor planning. Following are three concerns all small business owners should address as they plan their estates:

Who will take over the business if you die? Who should inherit your business? How will the IRS value your company?

Buy-Sell Agreements A contractual agreement between shareholders and their corporation or between a shareholder and the other shareholders of the corporation. The contract controls what happens to the business or the company stock in the event of death to the primary owner.

Estate Tax-Reduction Strategies Do you need to worry about estate taxes? The answer depends on how much your estate is worth. A tax on the estate of the deceased before any distribution is made to the heirs. An unlimited amount of property can pass to a surviving spouse at death. A federal unified gift provides an exemption, of $650,000 for 1999, before any tax is paid. The federal estate tax begins at 37%. There are several ways to reduce your tax burden: Life Insurance Trust, Family Limited Partnership, and Charitable Remainder trust.

Life Insurance Trusts A Life Insurance trust is simply an arrangement in which one person (the trustee) holds legal title to an asset contributed by another person (the grantor) and manages it for the benefit of the third person (the beneficiary). Under this arrangement, the grantor makes contributions to the trust which in turn pays the life insurance premiums.

Family Limited Partnerships The family limited partnership is a standard limited partnership comprised solely of family members. It is through this arrangement, however, that the family can protect its accumulated wealth and pass it on to future generations. It operates like a trust to ensures continuous succession of property ownership and control from one generation to the next while sheltering family assets and financial resources from waste, estate taxation, and creditors.

Charitable Remainder Trust A trust that provides an income to another individual for a certain period of time , then the remainder is left to a designated charity. Since you are making a partial charitable donation at the time of your death, your estate receives a deduction for a portion of the trust's value. Government tables determine the size of the estate tax deduction based upon the value of the assets in the trust. The term of the trust and the income to be paid to the beneficiary.