Estate PlanningExit PlanningFinancial Planning

Why Should I Align My Estate, Financial, and Business Retirement Plans?

A Successful Business Transition

When you start to plan your retirement from the business you have worked so long and hard to create and nurture, there are many factors to consider. In Business Retirement Planning: It’s a Team Effort!, for example, I’ve talked about what is required to successfully pass your business to your successor, be that a family member or an outside purchaser.

Key Driving Factors

Of the nine stages of effective business exit planning discussed in the article above, the key driving factors are the financial plan and the estate plan, and the key supporting factor is the alignment of all aspects of the business to ensure the wishes and desires expressed in these two plans can be satisfied.

These relationships are best represented graphically, as follows:

Your Financial Plan

Your financial advisor or wealth manager has developed an intimate knowledge of your wishes regarding your overall financial situation, your financial goals upon retirement, and how to achieve those goals. If you own a business, that business and its value and returns will play a key role in achieving the goals of your wealth management plan. The two key ways your business will support your retirement goals are through the on-going revenue spin-off that is available for investment or other aspects of wealth generation and through the value of your business when you retire and when you pass from this Earth.

Your Estate Plan

Your estate planner has developed an intimate knowledge of your wishes regarding how your estate is to be dispositioned upon your passing or incapacitation. However, if that estate includes a family business, there is a significant risk that your business may not be ready to be passed to a successor, and worse, there may be a conflict between what the estate plan requires and what the operating agreement or by-laws of the business legally require upon your death or incapacitation. This is especially true if you have a business partner(s), with or without a buy-sell agreement.

Bringing It All Together

It is critical that your estate, financial and business retirement plans be aligned and supportive of each other!

As your family business exit coach, it is my responsibility to collaborate with your estate and financial planners to ensure the business structure, business returns over time, and agreements are fully aligned with your estate and financial plans, and supportive of both. It is also my responsibility to ensure your business is sustainable once transferred to your successor and your successor is prepared to assume leadership upon your retirement.

So, to be confident your estate wishes will be carried out, make sure your business exit plan is driven by your financial plan, your estate plan, and the wishes and desires you’ve expressed in these two plans.

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