As time goes on, I continue to see more and more instances of business owners (and their families) not being prepared for their liquidity event. The typical entrepreneur maintains an all-in, head-down focus on building the business – focusing on initiatives to increase market share, manage the costs, and raise the required supplemental capital – and fails to contemplate the personal aspects of the building wealth associated with building a successful business.
Recently, I have had several conversations with business owners who were anticipating material liquidity events in the coming year. Needless to say they were excited in anticipation of this potential event and the resulting impact it would have on their personal financial condition. They were on the verge of transitioning from a low seven figure estate to an eight figure estate.
When asked what changes they have made in their estate plans in anticipation of this increase of wealth, I was greeted with blank stares. The common reply was “I hadn’t even thought about that … I have been so focused on the business.” The truth is neither had conversations with their CPA, their attorney or their current financial advisor. Their advisors were either unaware of the issues associated with the increase in wealth or unaware of the change in their client’s wealth picture, or worse yet, both. There are a number of strategies to analyze and consider for individuals in this situation including gifting and trust structures utilizing allowed valuation discounts. The impact of lack of attention to these matters could be millions of diminished estate value in the light of the current tax structure and even more if some of the ideas being discussed in Washington are enacted.
The CPA, the attorney, and the financial advisor that met your business and personal needs when your business, your wealth and your investible assets were smaller may no longer be right for you. Loyalty to historical service providers is admirable, but at some point, the tasks at hand might have grown beyond their areas of experience and expertise. As a business (and the resulting wealth) grows the challenges and opportunities change.
Would you consider having your primary care physician perform heart surgery or a knee replacement? Likely not. It’s similar to having your historical general attorney responsible for crafting your estate plan and navigating the legal aspects of the sale of your business or your historical general CPA opining on complex international tax matters. You want someone who is routinely involved in the world you are now living in.
The same holds true for your financial advisor. You want an individual and a firm that can assist you and your family to manage the opportunities and challenges that accompany your new wealth now and in the future.
At Telemus, the foundation of our organization is based on a holistic approach to financial life management for wealthy families. We have the experience, resources, personalized approach and succession structure to assist you in reviewing your world and developing, implementing and supporting appropriate ongoing strategies to prepare and support you, your spouse and your children now and in the future. Let us help you prepare for your future. Let’s start the discussion!