Sunday, May 09, 2010

What is Estate Planning?- Business Succession Planning

Almost all of our Kansas City area clients ask us, what is Estate Planning?

In our last couple installments we have been discussing the areas of concern for families and business owners regarding estate planning, which are as follows:

1. Lifetime control over financial and health care decisions
2. Planning for the cost-effective and expedient transfer of wealth at death
3. Family maintenance and protective planning
4. Business succession planning
5. Charitable planning
6. Gift and estate tax planning
7. Legacy planning
8. Elder law issues

Last week Garrett reviewed area 3- Family Maintenance and Protection Planning, today I will cover area 4- Business Succession Planning.

Business Succession Planning

Business succession planning answers these questions:  What happens to the business when you are no longer running it?  Who is going to manage the business when you no longer work the business?  How will ownership be transferred?  Will your business even carry on or will it be liquidated?

Closely-held and family owned businesses must address these issues in order to orchestrate a smooth transition between yourself and the future owners of the business.  With family businesses, succession planning can be especially complicated because of the relationships and emotions involved, and because it is often difficult for the business owner to discuss transition and transfer issues among family members.

It is estimated that between 50% and 70% of family-owned businesses do not survive the transition from founder to second generation.  Estate tax plays a role in these losses, but failing to plan for the succession of the business plays an equally important or greater role.  Saving estate taxes is usually the after effect of planning for other goals, such as preserving a happy and comfortable retirement and facilitating a successful transition of the business to co-owners, family, or key employees in order to support the retirement.  Business owners also too often over estimate the value of their business and are counting on the sale/transition of their business as their sole retirement vehicle.  This often leads to the business owner working much harder and longer than anticipated.  For this reason, we work closely with the business owner and their financial advisor to ensure their succession planning goals and retirement goals are in sync and achievable.

For more information or if you have questions, please contact us.  Please keep the questions and comments coming.

Jason Salinardi

BridgeBuilder- Plans for Life