Death Is Certain, and the Taxman Certainly Follows

Most people don't like thinking about their own demise. Even fewer want to think about what will happen to their business postmortem, and absolutely nobody wants to take on the jargon and paperwork involved in setting up an estate plan.

"The hardest thing to get people to embark on is the estate-planning process," says Patrick Smith, vice president and director of The Hartford Financial Services Group's (HIG Quote - Cramer on HIG - Stock Picks) estate and business-planning department. Business owners that start in their early 50s are ahead of the curve, he says.

More than 40% of small-business owners say their top concern is how to leave their business and realize the monetary benefits of their hard work, according to the Hartford's Business Owner survey. However, crippling taxes and poor planning too often put businesses to rest alongside their founders.

A Fate Worse Than Death

Besides their death, business owners are increasingly worried about surrendering a large chunk of their assets to federal estate taxes, says the Hartford Study on Consumer Attitudes and Perceptions Regarding Estate Tax released last month.

With national elections 14 months away, a growing federal budget deficit that might imperil tax cuts and a current law that calls for the federal estate tax to be repealed in 2010 and then reinstated in 2011 at a whopping 55 cents to the dollar has small business owners feeling their mortality.

"Federal estate tax rates are scheduled to go up and personal exemptions are scheduled to go down, which means individuals who plan to pass [on] more than $1 million in assets will have to take the estate tax into account," says Smith.

Timely Planning for the Untimely

Before you pull out your business terms dictionary, start off on solid footing by nailing down the value of your company. "Even though people say businesses are the principal source of retirement security, less than half of them are appraised," says Smith.

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