How to sell your deceased spouse's business

Inheriting a business from your deceased spouse often adds a variety of challenges to an already difficult situation. In many cases it is not an option to take over the business because you may lack the necessary credentials, experience, or desire to run the business on your own.

This leaves selling the business as your most likely exit strategy.

But selling a deceased spouse's business comes with a variety of potential pitfalls. These risks include selling the business below market value, failing to sell the business before it dissolves or paying an unnecessarily high tax bill after the sale.

Fortunately, by building the right team of advisers you can reduce your financial risks.

It will be helpful to determine if your spouse had a buy-sell agreement in place. A buy-sell agreement is a contract that would typically outline who will now be required to purchase the business and how the price will be determined.

These agreements, often funded with life insurance, will allow you to avoid finding a buyer and pricing the business.

In the absence of a buy-sell agreement, you need to find the right advisers to help you through the sale. Often, your first challenge will be to determine the value of the business. The first adviser on your team should be a Business Broker who understands your particular industry.

This adviser can help you set a fair price, search for potential buyers and advise you on how to negotiate the terms of the sale. Keep in mind that sometimes the value of the business may be valued substantially lower or potentially worthless after the death of your spouse. Your broker will be able to walk you through this as well.

The next adviser you want on your team is a good CPA. You should consult with your CPA well before seeking potential buyers. This adviser will help you determine how much of the final sales price is yours to retain and how much should be set aside for taxes.

This CPA should also be able to advise you on how to minimize your tax liability, because the timing of when you sell the business and how the sale is structured can have a major impact on your final tax bill. Having a CPA to guide you through your best options will make you better prepared to negotiate the final sale with your potential buyer.

The final professional you should have on your team is a trusted Certified Financial Planner. After all, the purpose of selling the business at a desirable price and minimizing your tax hit is to put you in a stronger financial position.

Your planner can guide you through that process by helping you assess your immediate and future financial needs. And knowing your financial planner will be with you long after the business is sold can help you make more informed decisions about how to use the proceeds of the business sale and work toward achieving your long term financial goals.

In addition and of more immediate value, a good planner will also help you better understand the potential lifestyle implications of your business selling at various price points. This can provide you with the critical information you need before agreeing to accept a perspective buyer's offer.

So if you find yourself in the difficult position of needing to sell a deceased spouses business, you owe it to yourself and your family to do yourself a favor and surround yourself with a team of professionals who can help you.

The decisions you'll need to make during this process have major implications for your financial future and having the right team will make all the difference.

• Jim Uren, CFP, owns Phase III Advisory Services, Ltd. in Buffalo Grove.

Securities offered through Royal Alliance Associates, Inc. (RAA), member FINRA/SIPC. Investment advisory services offered through Phase 3 Advisory Services, Ltd. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA. RAA does not provide tax or legal advice.