Estate Planning Essentials for the Self-Employed

Estate planning is an uncomfortable subject for many. For the self-employed, the topic can be even more sensitive.

Estate planning can be quite complicated when you own a business – there are business assets, business accounts, and the ever-looming threat of bankruptcy.

Health issues are another concern. Entrepreneurs are often unable to afford good health insurance or long-term care protection. Business assets are at risk if you become unable to work.

Business owners can also have a much larger estate tax burden. Minimizing these taxes requires thoughtful planning and expert guidance.

If you’re self-employed, make sure you keep the following in mind regarding your estate planning:


1. Power of Attorney

For the more conventionally employed, all that’s usually needed is someone you can trust.

  • For the self-employed, remember that the person with power of attorney will be making business decisions if you become incapable.
  •  Can you find someone you trust with the expertise to perform this task?

2. Will

Depending on your business and assets, it’s possible that your will could be considerably more complicated than that of others. Hire an attorney that works regularly with business owners. 

  • A valid will is the most important estate-planning tool, whether you’re a business owner or not.

3. SEP-IRA

A Simplified Employee Pension Individual Retirement Account (SEP–IRA) is more than a great retirement account option. It’s also a great tool for estate planning. It varies with each state, but most assets placed in these accounts are shielded from bankruptcy proceedings.

  • Your business might fail, but your retirement will still be safe.

4. Transfer or Retitle assets

Transfer your assets to your beneficiaries before your death. There are all types of tax implications, but it can be a useful strategy. It’s also possible, and often preferable, to sell some of your business assets to your beneficiaries for a small amount of money.

  • The courts can view it negatively if you attempt to transfer your assets during times of financial stress to protect yourself from creditors.

5. Medicare/Medicaid

Many are unaware that Medicare and Medicaid can take your assets if you’re placed in a long-term care environment. This type of care can be very expensive, and long-term care insurance is also pricey. Many entrepreneurs are unable to afford this type of insurance.

  • Meet with your attorney and investigate your options. Placing your assets in the name of a beneficiary is one option that can work.
  • If your health is questionable or you’re getting older, look into other possibilities. But remember, laws can differ between states.

6. AARP

Consider joining the American Association of Retired Persons (AARP). It’s a powerful lobbying group that provides excellent retirement planning resources for a low annual membership fee.


7. Trusts

Depending on the nature of your business and your assets, trusts can be an important estate-planning vehicle.

  • These estate planning vehicles can be structured to provide both long term security in case of the unforeseen while allowing a business owner to retain some semblance of control.

8. Life Insurance

Life insurance is often used as an estate-planning tool by the wealthy, since it’s commonly exempt from taxes. For the self-employed, life insurance policies can also be useful. 

  • Because whole-life insurance policies build cash value that is normally exempt from bankruptcy proceedings, it offers great protection from creditors.

Depending on the nature of the business, estate planning for the self-employed can be very similar to that of the more conventionally employed. It can also be much more involved.


Contacting an estate planning attorney is a good first step to protecting your business assets from creditors and excessive taxes. Get started today »

Planning ahead is a gift to your loved ones!

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