By: Donna Greene, CFP®
One of our core commitments at Busey Wealth Management is to assure our client’s estate plans are in good order and reflect their intentions. If you are a business owner, the ongoing process becomes more complex, but you can help ensure your goals and objectives are met by collaborating with seasoned professionals.
In "Business Succession Planning" and "The People Side of Succession Planning," we discuss the importance of determining the true value of your business and the significance of communication in your transition plan. Another important consideration is estate planning, where involvement of experienced counsel and accountants can help reduce potential estate taxes at the time of a principal’s death. We asked David Sholem, a shareholder at Meyer Capel, a Champaign-based law firm, to share some of his expertise on this topic.
According to David, once you have determined the value of your business, you can utilize “asset freezes, gifting programs, installment sales and other techniques to reduce the value of equity in the business held by senior family members. As an example, if senior family members hold preferred stock with a locked-in redemption value or less than a controlling interest in the business, significant discounts to the stock’s value can be applied at death based on a lack of liquidity, lack of control and lack of marketability for the holder of such stock.”
David goes on to say “After estate planning issues are addressed, experienced counsel is required to address succession issues and prepare or revise existing shareholders’ agreements, such as buy-sell arrangements. Many issues should be considered, such as (i) permitted transfers to spouses, members of the next generation and/or key employees, (ii) valuation formula to be used if stock is to be redeemed or otherwise sold, (iii) the purchase of key man life insurance and the funding of such purchases and (iv) the possible use of installment sale techniques to reduce the cash required at the death of a shareholder.”
Preparing your estate and business succession plans is a complex proposition, requiring expertise across the entire range of financial and legal considerations. However, assuring a smooth transition, and ensuring your wishes will be fulfilled when you are gone, can create peace of mind that you have prepared your business and family for the future. We encourage you to utilize Busey Wealth Management’s experience and innovative thinking, which have proven helpful to individuals and businesses for many years.