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Apr 26, 201812:53 PMExit Stage Right

with Martha Sullivan

Estate planning doesn’t go away because of new tax law

(page 2 of 2)

If you’re a business owner, your estate plan must include planning the exit from your business. The business is likely your largest and least liquid asset. Even in grief, the company needs to protect its profitability and value while its disposition is determined. The value of the business could have a significant impact on estate taxes. If there are multiple shareholders in the company, a death will trigger clauses in the buy-sell or operating agreement, assuming there is one. If not adequately planned for, managing the estate is even more complicated and your family could end up with far less in financial assets than you hope. Commit to completing four more steps:

  1. Document and communicate the business contingency plan: Consider and document what you want done with the business if you are incapacitated or die unexpectedly. Who’s in charge in which key areas? What incentives should be prearranged to encourage these individuals to help the company navigate the crisis? Should the company be sold? If yes, whom do you trust to help facilitate the sale?
  2. Review buy-sell documents annually: Too often we hear horror stories of buy-sell or operating agreements stuffed in the drawer after starting the business never to be looked at again until something hits the fan. Understand what the requirements are upon death or disability, the approach to value, alignment with insurance policy ownership and designations, and timelines for disposition. Do they still make sense? Does the buy-sell align with your other arrangements?
  3. Work on enhancing the value of your business every day: Self-sufficiency is the most important value driver in a business. That is, there are systems, processes, and people in place to ensure that the mojo keeps flowing if the owner goes away. Astute owners understand that this does not happen by accident. They build and execute business plans that recognize that the goal is to have a company that is “ready for sale” at any time.
  4. Plan your exit: In tandem with step nine, go through the process of planning your exit from your business sooner than later. In fact, start it today. You and your family derive considerable value from thinking through the process, understanding the pros and cons of the various options, and identifying strategies for enhancing family wealth — today, while you are still alive, as well as upon transition.

This may seem a bit daunting. It’s easy to want to kick this can down the road and ignore it, but don’t. Take one step today and another step tomorrow with your trusted advisors. They know you well. He or she wants to walk beside you in your efforts to launch your loved ones into the next phase of their lives (regardless of what the current tax law says).

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Aug 30, 2018 12:42 pm
 Posted by  BillY

Sounds Advice. I can't stress enough the importance of beneficiary designations and updating them. Create a spreadsheet or other document where you have a list of all of your accounts. It's a good idea to get into a habit of reviewing your designations at least once a year. This is usually the time when you'll get a notice or a reminder about updating your information.

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About This Blog

Spending half her career as an advisor to privately-held and family businesses and the other half in CFO/COO roles, Martha Sullivan is a partner and the succession planning practice leader in the business transition strategies group at Honkamp, Krueger & Co., P.C. She and her team have extensive experience assisting business owners achieve their personal, business, and transition goals. “Don’t think of the 'exit' from your business like it’s a four-letter word. Make it your next adventure!”

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