Business owners often overlook business in estate planning

When it comes to estate planning, many business owners make plans that overlook their most obvious asset: the business.

“The majority of business owners do not have a business succession plan in place,” according to an article on the website of the National Association of Estate Planners and Councils by Susan P. Rounds, director of wealth management for Deutsche Bank Trust Company Americas (http://www.naepc.org/journal/issue24a.html). “The list of reasons can be quite long, but boil down to the Three T’s: Time (not enough of it); Training (there has been no discussion of the alternatives for management and ownership succession); and, Team (the business owner does not have the right team of advisors on which to rely on for this kind of advice.)

The third factor is on us. Those of us in the estate planning community can use this development as an opportunity to perk interest and start the conversation. Don’t let your business owner client, or any client, go with the ‘No Plan Plan.’ ”

“Do you know how you are going to exit your business?” asks the website of the Small Business Administration (https://www.sba.gov/managing-business/closing-down-your-business/plan-your-exit). “You may have a dream of going public, selling to the highest bidder, or retiring and handing over your business legacy to your family. Big dreams aside, the truth is that many small business owners have no exit strategy for their businesses in the event of their disability, retirement, or death. Given the current economy, it isn’t surprising small business owners focus their energies on business survival, future growth and even remaining active in business after retirement. However, a business exit strategy not only means having a plan for the unexpected, including financial hardship, injury, disability and even death, it also means having a plan for the succession or transfer of ownership of your business when it comes time to hang up your hat and retire.”

“Continuing a business beyond one generation of leaders requires planning,” offers the Service Corps of Retired Executives (https://www.score.org/resource/developing-succession-plan). “Whether through private shares transferred to a senior manager, or a leadership transfer to family members, a succession plan smoothes the way for continued business success. Don’t shy away from succession planning because it looks too far in to the future. Devising a formal plan that outlines who will own and operate the company, once you are not in the day-to-day role, is a critical path decision that has a direct impact on long-term business profitability.

SCORE offers a five-point plan:

1. Choose Your Successor

2. Develop a Formal Training Plan for Your Successor

3. Establish a Timetable

4. Prepare Yourself for Retirement

5. Install Your Successor