Business Owners Require
More Complex Estate Planning

National Financial Legacy Group
National Financial Legacy Group teams with Spardata and your legal and tax advisors to provide coordinated estate planning for the business owner. In the right situation, we may be able to assist you in finding ways to save on your taxes; retiring when you're ready; ensuring that your business continues in the event of your death or disability; and attracting and retaining valuable employees. Visit our website to learn more. Joe Flood is insurance-licensed in Maryland, Virginia, D.C., and New York and a registered representative of Equity Services, Inc.
	Have NFLG contact me.

In estate planning, the business owner presents additional layers of complexity to the issues normally present. The test of proper estate planning is that the transmission of wealth be most efficient in costs, taxes, and time. Planning addresses the need for the requisite cash liquidity to pay taxes and provide living needs, and it uses the available mechanisms to buy time for the tax payments. All plans have to address the basic issues that complicate “who gets the stuff” and should provide for the heir to enjoy the inheritance at the appropriate time and in an appropriate format.

Nobody wins if the inheritance is lost through divorce, drugs, improvidence, or the mistakes of youth. The business owner, as in everyone’s estate planning, needs to employ trusts to finesse the tax system and to provide for those heirs who because of age or their personalities need to be protected from themselves.

Pension, IRA, insurance beneficiary designations, and other non-probate assets need to be investigated for the estate plan to stay coordinated. To keep the IRS from being the largest heir, basic estate planning for business owners reduces the nominal value of the estate through an annual gift program, family limited partnerships, other valuation discount planning devices, and strategic charitable giving.

The additional layers of complexity for the business owner arise from the concern for survival of the business in the hands of the next generation and survival of family relations. If the business generates rivalry for management control, employment, and contention about distribution of business earnings, the legacy is tainted and the business jeopardized. Business succession requires forethought and foresight. It requires dispassionate evaluation of family and inheritance may not mean ownership in the business. Management control and entitlement to salary or dividends do not have to be coincident, and the business capital structure may need to be structured to address the passage of wealth to family and the survival of the enterprise.

Equity ownership within the family can be threatened by divorce, and estate planning involves not only the requisite buy-sell agreements, but pre-nuptial and post-nuptial agreements.

Expert valuation of the business is critical in planning for tax minimization, gifting, business succession, or business reorganization. Business owners, while perhaps consummate in running the business, are notorious for not being in the ball park on the worth of their business. Family limited partnerships must have an appraisal at the time of organization to survive IRS challenge on valuation. Restructuring the business so that there are different types of ownership interests cannot start without a sound appraisal of the business and the ownership interests. An appraisal from an expert not only assures all the competing interests that none benefited from a faulty valuation, but it can also intimidate the tax auditor or provide the quality of evidence in court to give a firm basis for tax planning.