It is estimated that more wealth will be passed on to the baby boomers over the next 10 years than has been passed on during any other time in U.S. history. While estate planning may have helped reduce the tax and gift implications, another aspect to consider is inheritance planning, particularly in the case of family owned businesses.
Family business owners face the challenge of coordinating both the business and family estate plans while ensuring family harmony, the ongoing health of the business and creating the proper strategy to keep the wealth intact while reducing the burden on beneficiaries. Creating a business succession strategy and inheritance plan is going to involve asking and answering some tough questions for all parties. These questions include:
- Will the beneficiaries want to run the family business?
- What is the current financial condition of the company and what is its anticipated financial condition should ownership change?
- Is there enough liquidity in the business to run it during the time of transition?
- Is the ownership and management structure set up to facilitate the transfer of ownership?
- Do the beneficiaries have the work ethic and experience to run the business?
- Will there be any ‘sibling rivalry’ that will adversely affect the business?
It is important to plan properly to protect inheritance assets, particularly in the case of family businesses, from the factors that can reduce the asset, such as capital gains taxes, income taxes, probate costs and fees. An “inheritance plan” should be a major part of a family’s estate plan, when there’s a family business involved, make sure this plan involves business succession strategy.
- Charitable Planning in Times of Crisis - November 1, 2021
- Advantages of Using a “Grantor Trust” in Planning - October 5, 2021
- Dangers of Do-It-Yourself Estate Planning - August 1, 2021
