Without a doubt, procrastination will not get it done.
You have created and own a successful business.
Your family, key employees, and everyone else who interacts with your business are all looking to you ... to make sure it survives without you.
After all, you are planning to retire at some point, yes?
When it is time to get serious about getting serious about your business succession, you could do not better than follow the advice in a Smart Business article on the subject.
Here is a summary of the practical pointers to ponder:
Identify and prepare your successors.
Smaller businesses may need someone to oversee a sale or liquidation.
Accordingly, way before the time comes, the group should have a clear understanding of your goals, what is intended and how to achieve it.
Look at your liquidity needs.
Business owners are often highly illiquid given their business value to other assets ratio.
Liquidity in your estate is important to provide for your family and replace your earnings.
If estate taxes would be owed, then your estate would need liquidity to pay those taxes or else face a forced sale of the business.
Life insurance may be a good solution, with the structuring of life insurance policies through irrevocable trusts.
For that matter, the business itself could own a policy on you to help pay down debt, provide working capital, or replace your on-going contributions.
Structure company ownership to separate control from value.
If you own a controlling interest in the company, issuing voting and non-voting stock (or managing and non-managing interests in a partnership or LLC) could afford considerable flexibility for your estate.
One person or group can run the business and legally control it by owning the voting stock, and another group still can receive the economic benefits of ownership through non-voting stock without being involved in business operations.
Consider this: Having a trust to own both voting and non-voting stock is frequently better than outright ownership.
Reduce your estate tax liability.
A federal estate tax rate of 40% applies to estates exceeding $5.45 million (and $10.9 million for married couples).
Have you thought about reducing your estate tax exposure by some lifetime wealth-transfer planning?
An owner of a profitable, cash-flowing business could transfer wealth out of his or her taxable estate and into trusts for family at little or no gift tax costs.
Through installment sales of stock to irrevocable “defective” grantor trusts (IDGTs) and funding grantor retained annuity trusts (GRATs.). These tools and techniques reduce the need to purchase life insurance or set aside liquid assets in your estate to pay the tax.
No, this is not a DIY project.
Estate planning for a family business owner is a complex and on-going proposition.
Work with an experienced estate planning attorney to address the points above to help you reach the best outcome.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify. Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Smart Business (March 18, 2016) “Five things you should know about estate planning for a family-owned business”