If we accept this common definition of estate planning, estate planners must have the answers to these three Succession or EXIT questions:
1. Will your business continue without you?
2. Will your designated successor run the business, with minimal disruption?
3. And if your business sells for its full value and your family receives the cash today, will the current income you spend today continue for your spouse’s lifetime?
Most business owners have not been asked these questions, nor have they given much thought to possible answers. Succession or EXIT Planning provides a path to ask these questions in the context of lifetime exiting. In answering these lifetime-centered questions, business owners should articulate their lifetime goals regarding business ownership and family financial well-being and to use them to create their estate plans.
To do so, you must craft (or modify existing) business succession or EXIT arrangements as well as create (or modify existing) estate planning arrangements to reflect the business owner’s clearly articulated lifetime and “at death” wishes.
Of course the pressing question is: can the business owner’s wishes listed above be attained should he depart from this earth or his business tomorrow? The ability to answer this question (and taking advantage of the opportunity it offers) separates every-day planners from great ones.
Consider that most business owners want to exit their businesses within the next 10 years. You can safely assume that these owners have given (or are willing to give) far more thought to what they want and need (for themselves, family and business) when they exit in the near or not-too- distant future than what will happen (to their families and businesses) upon their one-day-but-not-any-day-soon demise.
Certainly business owners are more receptive to how they can reach their lifetime goals than they are to discussions of what they will need should they not make it to retirement. They need to link lifetime goals Succession or EXIT Planning and estate planning objectives, starting with the three questions listed at the outset of this article modified as follows:
1. If you left your business today, never to return, could it continue, with minimal disruption, in your absence? Would this be true whether your absence was due to a lifetime decision or to your death?
2. If you left your business today, never to return, could your designated successor run the business, with minimal disruption? Would this be true whether your absence was due to a lifetime decision or your death?
3. If you sold the business for its full value and received cash today, would your income continue for your and your spouse’s lifetime, with minimal disruption? Would this be true whether your absence was due to a lifetime decision or your death?
Once business owners become engaged in Successor or Exit Planning they begin to:
✔️ Understand the gap between existing resources and capabilities and those needed to permit a successful exit,
✔️ See that the same gap exists if they die, and
✔️ Take action to bridge the gap.
If you haven’t already included Successor, EXIT and estate-planning professionals in your network of professional advisors, do so. Look for ProActive professionals like us, who see the value in linking lifetime Successor (or Exit Planning) and estate planning goals and have the expertise to create business continuity arrangements that are consistent with estate planning solutions. They play an important role on your Advisor Team at the beginning and throughout these planning engagements.
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(314) 205-9595 or toll free 888-809- 9595
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