Raising a family can be extremely difficult. Raising a family while running a family business can be stressful. Planning your exit from a family business can seem downright impossible.
A client of ours recently approached us for advice on estate planning issues. She has four children, only one of which is actively involved in the family business. The other three have moved out of the state and are living their own lives, have married and chosen different career paths. Estate planning was an issue she was aware of but had not yet devoted much effort to.
Our client thought she had her exit strategy all planned out. Unfortunately her family had different ideas.
Our client needed advice regarding how best to divide up her estate. Due to the fact she had not spent much time planning, her children had their own ideas on how the estate should be split amongst the heirs, based on their own needs and concerns.
This client, like many small business owners, had invested her life savings in her business. She had failed to invest any significant assets in retirement savings accounts or other property that could be included in the estate and therefore, the value of the business made up the majority of her estate assets. In her words, “her business was all she had.”
Her concerns could be divided into two basic categories:
- Fairness & Values
- Business continuity & Legacy
Fairness & Values
Her son had been actively involved in the business since he was a teenager. He had worked his way through the ranks and was now in charge of operations while she retained the position of president and advisor. Our client knew she wanted to leave the business to her son because he had devoted much of his life to the growth of the company, similar to what she had done throughout hers. He had displayed the same types of values she had and she knew her son would maintain the integrity of the business. Selling the business to an outsider who may not have the same value system was not of interest to her. Yet she worried about being fair to her other children.
Business Continuity & Legacy
Our client had a strong desire to keep the business in the family. She felt she had established a legacy for her family and was very proud of the fact that she had built a business that could provide her entire family with security well into the future. She felt the continuity of the business was very important to the future well-being of her family.
Unfortunately she had neglected to discuss these issues with her family. The kids who lived out of state had always thought the business would eventually be sold and they had already made plans for their portion of a cash inheritance. Essentially they had their own dreams and they hoped their inheritance would help them achieve those dreams. The son who worked in the business had always thought he would own at least a portion of the business one day.
In this specific situation, we were able to work with the entire family and help them put together a plan that was desirable to everyone involved. We became what is known as a “family advisor”.
Oftentimes, as consultants, we are asked to work through the numbers to help our clients with business decisions. What our clients often do not realize is that we are able to help them with the “soft” issues as well. For over 30 years Terry, Lockridge & Dunn has been advising people on business strategies. In that time we have seen just about every situation one can imagine.
We are available to help you with any business issue, no matter how small or how personal. We endeavor to be your trusted advisors, the first call you make when you have an issue. If we cannot add value to your situation then I assure you, we have the ability to find someone who can.
Give us a call at (319) 364-2945 and see how we can put our experience to work for you.
Terry, Lockridge & Dunn and World Trend Financial provide real advice to give the business owner an edge when it comes to succession or exit planning. Steven Covey who wrote “The Seven Habits of Highly Effective People” said it best when he said “Begin with the end in mind”. It is never too early to plan your business exit strategy. Terry, Lockridge & Dunn, Inc. will send electronic mail similar to this periodically – If you are not interested in receiving future messages, please reply to this email.