June 11, 2015
Conversations about how to manage family wealth involving a family-owned business may help map out the company’s future and manage the expectations of individuals involved in the company.
Family discussions ought to take place regularly to create financial strategies that take the long-term desires of the entire family into account.
How can an estate plan set aside financial resources for a family business?
WINGET: A good estate plan can help mitigate estate taxes and manage the income tax characteristics of the assets, including the cost basis, for the owners. It blends a plan for the business and the family by anticipating and providing a source of liquidity for estate taxes as well as a management and ownership strategy.
AKSOZ: It’s very important to have an estate plan in place. That’s because for most entrepreneurs, the business itself is the largest asset they own and usually the source of funding for the family’s cash flow and most of their life events. Having a road map in the form of an estate plan can make the succession and transfer of a business much more efficient for the family.
How are trusts leveraged in a multi-generational business?
WINGET: Trusts are typically used in three cases. When family members are not active in the business, a trust can help own and manage the business asset. Another potential benefit comes in the form of asset protection — guarding against creditor risk from lawsuits, divorces and the like. Lastly, it can be an effective way to help keep a business within the family, if that’s a long-term goal, over multiple generations.
With a business likely to be passed on to a second or third generation, how can heirs take part in succession planning?
WINGET: Be proactive. Heirs should discuss their individual goals with the current ownership and management. They should find out what’s required in terms of experience or education for any positions they’re considering.