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One-size-fits-all. It is an approach that works for hats, but not for estate planning, particularly when one of the assets in your estate is a business. Having a well-designed estate and business succession plan in place will help to ensure your business and its assets are handled according to your wishes after your passing.

And this also applies to a business or businesses you may not even realize you have. For example, if you own any assets – with or without a partner – that produce income, whether it be a commercial or residential property or boat you rent out on weekends, that is considered a business. This could also include any type of online or web-based business that generates income.

And just like with a “traditional” business, you need to make sure your estate plan has contingencies for what to do with this business once you are gone.

There are a wide variety of strategies you can employ to protect your business interests. Which ones you use will vary depending on your business and the ownership structure. But the key is to have them in place before you need them.

For example, if you are the sole owner of a business, you may have specific ideas about who you want to leave it to after your death. However, in some states, if you die without a trust or a will, your business may automatically be divided between your spouse and your children, an arrangement you may not have intended.

As you may imagine, this can turn into a complicated situation if you’ve been divorced, you’ve remarried or you share children with more than one individual. This is why it is important to think through estate planning as a business owner.

Having a business partner or partners can make things even more complex. One of the most important things you can do in this type of situation is to make sure you have a legal document in place that governs what will happen to your business should one or more partners die.

Generally speaking, that document would take the form of an operating agreement for a limited liability company or bylaws for a corporation. The specific information included in these documents depends on your type of business and state regulations, but they usually contain a description of the business operations, how books and records are maintained, how profits and losses are treated, and most importantly, for estate planning purposes, a succession plan.

This succession plan should cover how an owner exits a business, either voluntarily or involuntarily, and what happens in the case of death or incapacitation.

To illustrate how important this is, let’s reverse the situation mentioned above. Imagine a scenario in which your business does not have an operating agreement and your partner does not have an estate plan.

Upon your partner’s death, their share of the business could be inherited by their spouse and children, which would also include any children from a previous marriage. Suddenly, instead of having one partner, you now could have two, three, maybe five or more new partners, all of who likely have ideas and goals for the business that may be wildly different than your late partner’s – or yours.

To avoid ending up in this situation, or leaving your partner in a similar situation, discuss with your attorney whether your operating agreement or bylaws should contain a buy and sell agreement, also known as a buy-sell or buyout agreement. This is a legally binding contract that determines what happens to a partner’s business shares should they die or exit the company.

The two most common types of buy and sell agreements are a cross-purchase agreement and a redemption agreement. With a cross-purchase agreement, the remaining business owner or owners purchase the shares of the former partner. In the case of a redemption agreement, the business itself purchases the shares.

In either case, the buy and sell agreement requires that the shares of the partner who wishes to exit be sold either to the company itself or to the remaining partners. And in the case of a partner’s death, the agreement requires the estate of the deceased to sell the shares back to the company or partners.

The buy and sell agreement should also include a predetermined method for valuing the company at the time of the transaction, as well as a method for funding the purchase. This is important because if the remaining partner does not have the financial resources to buy the former partner’s shares, they could revert back to heirs.

One of the most common ways to fund a buy and sell agreement is to use life insurance. In this scenario, the business takes out a life insurance policy on each of the partners in an amount commensurate with the value of their share of the business. The beneficiary of each policy is the other partner. So if one partner were to die, the other partner would receive the payout from the policy, which could then be used to buy the deceased partner’s shares from their estate.