Last week in our Geyer Law blog, Cara Chittenden discussed the importance of having estate planning attorneys, CPAs, and financial planners work together to help clients realize their goals. Nothing demonstrates the need for precisely that kind of coordination than the sale of a business.
All too often, Mariner Wealth Advisors observe, estate and tax planning happen after the sale of a business, “when the best opportunities to protect and preserve a business owner’s wealth are already gone”. Pre-sale estate planning, on the other hand, they stress, “allows you to turn a one-time liquidity event into a multi-generational wealth transfer strategy.”
The authors highlight four areas of focus in pre-sale estate planning:
- locking in lower valuations (based on current earnings of the business)
- reducing or avoiding estate taxes
- integrating the event with family and legacy goals
- reviewing ownership structure
At Geyer Law, where, for the past quarter century, our team has been helping Indiana businesses start off on the right foot, we know how crucially important decisions face clients when the time comes for exiting their business. Selling a business, we know, “has to work on all fronts”, in that a successful succession plan will affect not only the owner’s’ retirement, but also the future of family members and employees.
Critical concerns include:
- if the sale is likely to represent a loss of status and family identity
- how children’s inheritances can be protected from their creditors – or from negatively influenced decision-making
- if and how the seller’s charitable gifting will be involved
- how the sale impacts healthcare financing (for both the seller and family and for remaining employees
- the income/capital gains/estate tax planning impact of the transaction
I don’t think I’ve ever heard a more cogent expression of the impact of selling a business than the one expressed in an About 1834 Wealth Management article from Old National Bank:
“Your sale will turn a very large, illiquid asset into liquid assets. This will impact your estate planning and investment portfolio, but it will also give you an opportunity to change your lifestyle…You no longer need a succession plan for operational continuity, but you must now plan for the management, investment, and distribution of significant cash assets.”
The message –Before the business sale, prepare yourself for a different future, and — bolster the estate plan!
– by Rebecca W. Geyer
