estate planning for business owners -...

Estate Planning for

Business Owners

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WHAT ATTENDEES WILL GAIN

• Knowledge of planning concerns and

estate planning strategies for business

owners

• Confidence to engage in estate planning

with business clients and prospective

clients

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AGENDA

Estate Planning For Business Owners

• Unique planning for beneficiaries

• Strategies to plan for business assets

• Coordinating the entire estate

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PLANNING FOR

BENEFICIARIES

Important Estate Planning Issues:

• Understanding the difference between equal and fair

• Planning should minimize family conflicts

• Business success is a priority

PLANNING FOR BENEFICIARIES


• Equal vs Fair

– Some children are not involved in the business

– Some children have already received business interests

(earned or gifted)

– Clients may or may not believe in equal distributions


• Planning should minimize family conflicts

– Comprehensive planning will address potential conflicts

– Family meeting should be a part of the process

– Son or daughter running business should not have undue

influence, or appearance of undue influence


• Business success is a priority

– Beneficiary planning should emphasize business success

– Comprehensive counseling is necessary

BUSINESS SUCCESSION

PLANNING

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Common planning tools:

• Buy – Sell Agreement

• GRAT

• ILIT

PLANNING FOR BUSINESS SUCCESSION

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PLANNING FOR BUSINESS ASSETS

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Buy Sell Agreement

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Client Creates Buy–Sell Agreement with Co-Owners

• Cross Purchase or Redemption

• Business valuation

• Triggering events

• Funding

BUY–SELL AGREEMENT

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• Cross Purchase or Redemption


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Business valuation

– Fixed Price v. Formula

– Multiple of Revenue

– Appraisal Method


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• Triggering events

- Disability

- Death

- Divorce

- Bankruptcy


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• Funding


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• Key benefits to client:

– Business continuity

– Peace of mind

– Provides income to grantor in the case of disability

– Provides a negotiated price for the owner's business at death

and relieves the estate from having to market and sell the the

business

BUY – SELL AGREEMENT

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Grantor Retained Annuity Trust

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• Client creates a Grantor Retained Annuity Trust

- Transfer income producing asset to trust

- Receives income for trust term

- Assets transfers to beneficiaries upon termination of trust

GRANTOR RETAINED ANNUITY TRUST

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• Key benefits to business clients:

– Leverages a client’s estate tax exemption by transferring a

business asset to successors at a reduced value

– Future appreciation not in estate

– Provides income to grantor

GRANTOR RETAINED ANNUITY TRUST

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Irrevocable Life Insurance Trust

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IRREVOCABLE LIFE INSURANCE TRUST

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• Client creates an irrevocable trust:

– Client gifts trust amounts needed each year to pay insurance

premium

– Trustee purchases insurance on life of client

– Insurance proceeds are not included in client’s estate

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• Key benefits for business client:

Asset Protection- the life insurance is protected from future

creditors or lawsuits against business owner

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Estate liquidity – provide cash for estate expenses, including fees

and taxes

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Equalizing Inheritance - children who are not active in the business

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Funding - for purchase of business by children who are inheriting

the business

PLANNING FOR NON-

BUSINESS ASSETS

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• Business Assets are an important piece, comprehensive

planning includes entire estate:

Planning for disability

Planning for a surviving spouse

Planning for children, grandchildren, family members & friends

Planning to minimize taxes

Planning to minimize expenses

Planning for Non – Business Assets

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• Comprehensive Estate Planning

Disability Planning

Panel to decide disability

Written instructions about care

PLANNING FOR NON BUSINESS ASSETS

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– Planning for a Surviving Spouse

How will spouse own the assets?

Are protections important?

Who will serve as Trustee and is spouse comfortable with current plan?


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– Planning for children, grandchildren, family & charity

How will children and grandchildren receive the inheritance?

Are protections important?

Who will serve as Trustee?

What does the client think is “fair”


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– Planning to minimize taxes

Overview - 2014 Estate Planning Tax Laws$5,000,000 unified exemption

(indexed to $5,340,000 in 2014)

40% maximum tax rate

$14,000 annual gift

DSUEA portability

Creates “permanent” estate tax


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– Planning to minimize expenses

Establish and Use a Team of Advisors

Keep plan current with estate tax laws and family goals


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Is Estate Planning Still Relevant?

• Today's laws may change with a new Congress or President

• Today's laws create opportunities to plan for business owner's

estates (taxable and non-taxable)

ESTATE PLANNING FOR BUSINESS OWNERS

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QUESTION AND ANSWER

estate planning for business owners -...

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