Commercial Real Estate Succession Strategies: Guidance for Entrepreneurs!
As a keen business owner, you're probably juggling a million responsibilities everyday - managing operations, keeping your team happy, and staying ahead of the competition. However, there's one crucial task that you shouldn't ignore: estate planning for your commercial properties.
Estate planning may not be the most exciting thing in the world, but it's a vital part of your business journey. After all, securing your business assets for the future is one of the smartest moves you can make. Let's share a few tips that'll help you feel secure about your business's future, even when you're not around.
Start Planning Early
We get it – thinking about what happens after you're gone can be daunting, especially when you're busy. But remember, it's your responsibility to set things up so that your loved ones won't have to deal with unnecessary headaches and chaos when you're no longer here. It's like placing an ultimate insurance policy for your business's success.
Financial advisors recommend starting an estate plan as soon as you become a legal adult. After that, it should be updated every three to five years. Early planning gives you more control over how your commercial properties are handled and the transition will work once you're no longer there.
If you have the skills and knowledge to prepare your will yourself, it'll cost you just $80. But let's be honest – as a business owner, you've got more important things to take care of. You can also get attorneys to prepare the will or power of attorney for just $150 to $200. However, experienced attorneys who specialize in estate planning matters can charge you between $250 and $350 per hour. You can find them at an estate planning law firm.
Lady Bird Deeds
If you're not familiar with Lady Bird Deeds, it's time to take a closer look. These deeds are useful tools for anyone looking to avoid probate while maintaining control over their commercial properties during their lifetime.
According to the Law Offices of David Djebelli, P.A., a lady bird deed gives you full control of your property during your lifetime. You can sell it, mortgage it, or do anything else with it as if no one else had an interest in it. When you pass, the property automatically transfers to your chosen beneficiary without going through probate. The best part? It's simple, straightforward and can help ease your family's burden during an already emotional time.
Lady bird deeds are accepted in many US states, including Florida, where they function the same way – inexpensively and without the need for probate.
Plan for Business Succession
Who's going to take over when you're no longer running the show? It's a question that many business owners would rather not think about. But avoiding the issue won't make it go away – it's crucial for ensuring your company's continued success.
Your son, daughter, maybe wife or husband – who takes over? Perhaps you don't want any of them to have executive authority, but want them posing as figureheads. The succession plan can get complicated – don't brush it off as 'no big deal'.
Business succession planning isn't a one-size-fits-all deal. Some owners sell to third parties, others pass their businesses down to family members, and some even transition ownership to employees. It's all about selecting someone with the right leadership skills to carry your vision forward.
Tax Planning
- Step-Up in Basis: Real estate held until death typically receives a step-up in basis, resetting the property's taxable value to its current market value. This can significantly reduce or eliminate capital gains taxes for heirs[5].
- Annual Gifting Strategies: Utilize annual gifting limits to transfer wealth without triggering taxes. For example, as of 2025, individuals can gift up to $18,000 per year per recipient tax-free[5].
Use of Trusts
- Grantor Retained Annuity Trusts (GRATs): These trusts allow the transfer of assets while minimizing taxes. They provide an annuity to the grantor for a set period, then transfer the assets to beneficiaries[5].
- Intentionally Defective Grantor Trusts (IDGTs): These trusts can be used for business succession planning by allowing the transfer of business interests while minimizing tax liabilities[3].
Business Succession Planning
- Business Continuity: Ensure the continuity of the business by planning for the transfer of ownership to successors, which can include family members or other stakeholders[3].
- Buy/Sell Agreements: Implement agreements to control the transfer of business interests and ensure that the business or other owners can purchase shares from departing or deceased owners[1].
By incorporating these strategies into an estate plan, individuals can effectively manage and transfer commercial properties while minimizing tax liabilities and ensuring continuity of their business legacies.
The process of estate planning in business may not seem exciting, but it is an essential aspect of ensuring your commercial properties are secure for the future. Early planning, as suggested by financial advisors, provides more control over how your commercial properties are handled and the transition that will occur when you're no longer there.
In the realm of estate planning, Lady Bird Deeds are valuable tools for avoiding probate while still maintaining control over commercial properties during your lifetime. Accepted in many states, including Florida, Lady Bird Deeds function inexpensively and without the need for probate.
