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Planning for Business Owners, Their Families, and Their Estates (A Case Study) (Provided exclusively for use by FSP Chapters)
User’s Guide
This package is designed for Chapters to use in developing an interactive, multi-disciplinary educational program. It includes a set of case facts that you can share with your attendees. This session revolves around the issues of the fictitious Adams Family. The head of the family-owned business and the owner and his wife want to retire. They have two sons, one in the business and one who is not, and a daughter whose husband is also in the business. Although this is not a true story, the family’s concerns are very real. The issues are common to most family-owned business owners. The problems and roadblocks to the successful transfer of the business from one generation to the next are those shared by many. This package was created so that your Chapter can design an interactive, collaborative, multi-disciplinary educational program using a panel to discuss possible solutions for the case. The Chapter can introduce the characters and highlight their issues and then have the panel discuss the case and offer their solutions. How to use these materials:
The case study issues are very general and broad in scope so that, regardless of future tax and legal changes, the case can continue to be used.
The issues are many and universal.
The case study can be used by different Professional Interest Sections in your Chapter for smaller group meetings.
You can make it available for presentation and discussion at business and law schools in your area.
Program Format: There are multiple formats to offer an educational program around this case study:
As a speaker presentation o Select the one topic/issue and a speaker o Send the case facts to the speaker o Ask the speaker for a presentation outline for CE filing and as a handout o Introduce the case and cast of characters at the beginning of the meeting to set the scene o Remember to keep the audience engaged and involved
Use a panel of experts o Select topics/issues and panel of experts (we suggest one from each discipline) o Send the panel the case facts o Ask the panel to coordinate their plan and presentations o Request an outline of their presentations for CE filing and handout o Introduce the case and cast of characters at the beginning of the meeting to set the scene o Remember to keep the audience engaged and involved
Role-play with Attendees o Assign different members roles from the case study and encourage them to assume the
attitudes and issues of the character o Assign different members to act as the professional advisors, each one acting on behalf of
their client’s best interests. o Introduce the case and cast of characters at the beginning of the meeting to set the scene
o Have the advisors interview the characters to determine their issues and objectives so that all the conflicts are revealed
o Discuss ways in which the conflicts may be resolved for the general good of all stakeholders o Have the professional advisors present their plan, identifying and resolving any remaining
conflicts. o Keep those members who are not participating in the role-playing engaged and involved.
Ideas for discussion topics:
Estate planning issues
Heirs
Business succession
Family in and out of the business
Key persons Financial areas relevant to the case (limited only by your imagination):
Estate planning
Key person
Employee benefits
Retirement planning
Estate equalization
Business succession
Business valuation
Intra-family relationships
Tax issues
Health insurance and preexisting conditions Potential focus areas for the case:
Business succession: A situation where the retiring business owner had not told anybody anything about their future. The financial professionals will gave the client wise advice as well as the legal documents and insurance products that he could use to bring clarity, sanity and comfort to himself, his family and his management team.
Retirement planning for business owners: Address the issue faced by many family-owned business owners and other owners of closely-held businesses: How can they retire when most of their assets are tied up in the business?
Health care in retirement: Discuss potential options for the business owner and his family for dealing with potentially costly health care in retirement, including long-term care.
Filing for CE: When you file the program with your state for CE credit, you will need to include the provided case information, a speaker’s (or panel’s) outline, and speaker bio(s). Case study video (optional): https://vimeo.com/237755761/67db649125
Planning for Business Owners, Their Families, and Their Estates (A Case Study)
Cast of Characters Tony Adams Sr.: Owner of Adams Family Enterprises. Angela Adams: Tony’s wife and mother of Tony Jr., Rose, and Michael. A stay-at-home
mom. Tony Adams Jr.: Tony and Angela’s oldest son. 20 years at Adams Family Enterprises.
Wants to be the heir-apparent in the business Julie Adams: Tony Jr.’s wife. Rose (Adams) Gray: Tony and Angela’s only daughter who is feels the business tension
between her father, older brother, and husband. Alan Gray: Rose’s husband. 20 years at Adams Family Enterprises and an extremely
valuable contributor. Company expert in computers and technology. Emma Gray: Rose and Alan’s daughter. Michael Adams: Tony and Angela’s youngest child. Does not work for Adams Family
Enterprises and wants money for acting school. Engaged to Heather Moss.
George Bradford: Tony’s best friend. Divorced with two children (17 and 24). 34 years at
Adams Family Enterprises and an extremely valuable contributor. He’s the company rainmaker.
Julia Murray: Angela’s mother. Heather Moss: Coopers Project Partner. Engaged to Michael Adams. Thomas Chau: Coopers Project Partner. Henry Jones: Coopers Project Partner.
Planning for Business Owners, Their Families, and Their Estates
The Client: Tony Adams Sr.
64 years old
Married to Angela (61 years old) for 40 years o Tony and Angela pay some expenses for Angela’s mother, Julia
Tony and Angela have three adult children o Son, Tony Jr., age 39
20 years at Adams Family Enterprises and the heir apparent (in his mind) to take over Tony Jr. is married to Julie and they do not have any children
o Daughter, Rose, age 38, is not involved with the Company Rose’s husband Alan Gray has worked at Adams Family Enterprises for 20 years and is
an extremely valuable contributor with computer expertise Rose and Alan have a daughter, Emma, who is 18.
o Son, Michael, age 32, is not involved in the company Rents family’s investment property for $3,500 per month under market value ($1,000) Parents pay some expenses, including food and health insurance Wants to go back to school to study acting at his parent’s expense Engage to Heather Moss, one of the Coopers Project partners
The Company: Adams Family Enterprises Tony Sr. is the sole shareholder
Coopers Project Partners are paid 5% gross from their video game
There is tension between senior management
Tony Sr. has not communicated his retirement plans or succession plan
Tony’s objectives: Phase out of business in next 3-5 years, but wants to maintain his lifestyle
Ensure that Angela is financially secure independent of the Company.
Eliminate/minimize the federal estate tax burden on his family.
Ensure continuation of the Company for the benefit of his family and the employees.
Children should be treated fairly in terms of inheritance upon Tony’s death
Determine his successor in the company between Tony Jr., Alan, George, or the Coopers Project partners
Things you need to know: The Adams’ live in a state that does not impose an estate or inheritance tax.
Adams Enterprises Five Year Historical Income Statement (In Thousands)
Revenues: 2017 2016 2014 2013 2012
· Sales of Radio Products $ 15,000 $ 15,500 $ 15,250 $ 18,750 $ 23,000
· Consulting & Service Rev. $ 6,000 $ 4,900 $ 3,750 $ 3,000 $ 2,000
· Sales of Game Products $ 2,000 $ - $ - $ - $ -
o Total Revenue $ 23,000 $ 20,400 $ 19,000 $ 21,750 $ 25,000
Cost of Goods Sold:
· Radio Products $ 10,500 $ 10,850 $ 10,675 $ 12,188 $ 13,800
· Radio Labor & Parts $ 2,100 $ 2,170 $ 2,135 $ 2,625 $ 3,220
· Game Products $ 1,000 $ - $ - $ - $ -
o Total C of G Sold $ 13,600 $ 13,020 $ 12,810 $ 14,813 $ 17,020
Gross Revenue: $ 9,400 $ 7,380 $ 6,190 $ 6,938 $ 7,980
Expenses:
· Selling Expenses $ 2,664 $ 2,100 $ 1,733 $ 1,943 $ 2,394
· Gen & Admin Expenses $ 2,950 $ 2,780 $ 2,352 $ 2,636 $ 2,075
· Depreciation & Amortization $ 200 $ 200 $ 200 $ 200 $ 200
· Officer’s Compensation $ 1,240 $ 940 $ 800 $ 800 $ 750
o Total Expenses $ 7,054 $ 6,020 $ 5,085 $ 5,579 $ 5,419
Net Income Before Income Taxes: $ 2,346 $ 1,360 $ 1,105 $ 1,359 $ 2,561
Income Taxes: $ 915 $ 530 $ 431 $ 530 $ 999
Net Income After Income Taxes $1,431 $830 $674 $829 $1,562
Adams Family Enterprises, Inc. Statement of Revenues and Expenses For the year ended last December 31
CONSOLIDATED RADIO GAME DIVISION DIVISION Revenues:
Sales of Radio Products $ 15,000,000 $15,000,000 $ ------
Consulting & Service Rev. $ 6,000,000 $ 6,000,000 $ ------
Sales of Game Products $ 2,000,000 $ ------ $ 2,000,000 o Total Revenue $ 23,000,000 $21,000,000 $ 2,000,000
Cost of Goods Sold:
Radio Products $ 10,500,000 $10,500,000 $ ------
Radio Labor & Parts $ 2,100,000 $ 2,100,000 $ ------
Game Products (1) $ 1,000,000 $ ------ $ 1,000,000 o Total C of G Sold $ 13,600,000 $12,600,000 $ 1,000,000
Gross Revenue: $ 9,400,000 $ 8,400,000 $ 1,000,000 Expenses:
Selling Expenses $ 2,664,000 $ 2,100,000 $ 564,000
Gen & Admin Expenses $ 2,950,000 $ 2,780,000 $ 170,000
Depreciation & Amortization $ 200,000 $ 90,000 $ 110,000
Officer’s Compensation $ 1,240,000 $ 940,000 $ 300,000 o Total Expenses $ 7,054,000 $ 5,910,000 $ 1,144,000
Net Income Before Income Taxes: $ 2,346,000 $ 2,490,000 $ (144,000) Income Taxes: $ 914,940 Net Income After Income Taxes (2) $ 1,431,060 Footnotes:
(1) Includes 15% for Tom, Hank, Heather (2) Transfer from retained earnings are taxed a second time at 15% Federal and State rate
Adams Family Enterprises, Inc. Balance Sheet
December 31 of Last Year
ASSETS General Assets:
Cash $ 4,000,000
Accounts Receivable 300,000
Inventories 150,000
Income Tax Refunds Receivable 10,000
Prepaid Expenses & Other Current Assets 32,000 o Total Current Assets $ 4,492,000
Fixed Assets:
Property & Equipment, Net of Depreciation $ 200,000 o Total Fixed Assets $ 200,000
Other Assets:
Investments – Real Estate $ 6,000,000 o Total Other Assets $ 6,000,000
Total Assets: $ 10,692,000
LIABILITIES & STOCKHOLDER’S EQUITY Current Liabilities:
Accounts Payable $ 250,000
Accrued Expenses & Other Current Liabilities 120,000 o Total Current Liabilities $ 370,000
Long Term Liabilities:
Notes Payables-shareholders $ 100,000
Other Long Term Debt 30,000 o Total Long Term Liabilities $ 130,000
Total Liabilities: $ 500,000 Stockholder’s Equity:
Capital Stock $ 10,000
Retained Earnings 10,182,000 o Total Stockholder’s Equity $ 10,192,000
Total Liabilities & Stockholder’s Equity $ 10,692,000
The Adams Family Tree
Copyright Turner Consulting LLC 2018 1
Fact Finder Profile
For Panelists Only
Tony Sr. and Angela Adams
Copyright Turner Consulting LLC 2018 2
Angela Adams and Tony Sr. Adams 2017 Income
Angela – Stay at Home Mother $0
Tony Sr. – President and CEO, Adams Enterprises
$382,000
Total $382,000
Real Estate
$250,000 Home (Joint tenants)
2,300 square feet
3 bedrooms
3 baths
House and Garden magazine kitchen
pool
vegetable garden Autos
Her
2016 Lexus RX
Market value - $38,000
SUV
20,000 miles Him
Jaguar leased through Adams Enterprise (not on personal balance sheet)
10 year old Ford truck
Background Tony Sr. finally understands what is going on around him at work. He is feeling the tension of his senior managers, including his son and son-in-law. Tension at work bothers him because his business gives his life such meaning. Income from the business he started has also enabled him to maintain a comfortable lifestyle and raise his children. While his son, Tony Jr. and daughter, Julie, are largely independent, his youngest son, Michael, is still trying to find his way. Tony Sr.’ wife, Angela, insists that they help Michael all that they can. After all, Tony Sr. gave jobs to the families of the two oldest children; Michael deserves his perks as well. Part of those perks have been allowing Michael to live in the family’s investment home paying rent of $1,000 a month in a property that could command monthly rentals of $4,500 or higher. They also pay some of Michael’s expenses and have offered to pay for additional graduate education. They are also paying some of Angela’s mother’s expenses, although those costs feel like less of a burden. Tony Sr. feels healthy. However, he is a tired throughout the day; more than once he has nearly fallen asleep while driving his car. He is unaware that he has mild sleep Apana. At 5’11” 280 pounds he is nearly 100 pounds over his ideal weight. A little extra weight was always fine with him and Angela until George started having his heart problems. But business issues, including those caused by declining sales, seemed more pressing that any potential health problems. Tony Sr. does not have a healthy diet.
Copyright Turner Consulting LLC 2018 3
One problem that really vexes Tony Sr. is a searing pain radiating up his left leg to his backside. He carries his wallet in his back left pocket. With his constant sitting at his desk and his lack of exercise the condition has worsened. He heard from a friend that there is a surgery that can correct the condition. He might look into it at some point.
Medical Protocol Medicines - Tony Sr.’s doctor prescribed baby aspirin, high blood pressure pills (Lisinopril-Hydro-chlorothiazide) and statins (Prevastatin). Tony Sr. regularly takes these medicines. Medical Tests – Tony Sr. takes gets tests that his doctor orders. His blood pressure is well managed. Exercise – Tony Sr. works all the time, stopping occasionally for dinners, movies and leisurely walks with his wife. He has no exercise program. Doctor Visits – Tony Sr. sees his doctor once a year. He sees no need to share details with his doctor about the little nagging stuff related to his health. Tony Sr. reasons that if there is something really wrong with him the doctor will tell him (not the other way around). Tony Sr. suspects that this is the major reason that his medical bills have been so low over the years. In his own small way he is beating the system.
Family Financial Dynamics
Shared Responsibility
Tony Sr. plots strategy for their family
Angela pays the bills on time
Angela is worried about mother’s and Michael’s finances
Credit scores: o Angela 790 o Tony Sr. 775
Group Voluntary Products, Retail Products and Legal Documents - Disability Insurance – (Group) $5,208 a month for Tony Sr.) - Long Term Care Insurance - no - Group life insurance - $595,000 face value., Angela is beneficiary - Last will and testament – cross wills -Angela and Tony Sr. are beneficiaries; Each is
executor for the other - Health care proxy – no - Power of attorney – no
- Individual ife insurance – Whole life policies on each - $300,000 face/$20,000 in cash value on each policy
Angela and Tony Sr. Annual Income and Spending In 2017
2017 Income
Angela – Stay at Home Mother $0 $0
Tony Sr. – Chief Executive $382,000 $31,833
Total Gross Income $382,000 $31,833
Copyright Turner Consulting LLC 2018 4
2017 Expenses
Type of Expense Annual Monthly Weekly Daily
Taxes $130,000 $10,833
Health Expenses Health Care premiums
$12,000
$1,000
Family out of pocket medical costs $2,000 $167
Medical premiums paid on Michael’s behalf $6,000 $500
Payments for Mother in law’s medications $12,000 $1,000
Taxes: Federal and State Taxes $31,500 $2,625
Housing Property tax
$9,500
$792
Utilities $4,000 $333
Lawncare/landscaping $2,500 $208
Food Tony Sr. and Angela $2,700 $225
Food for Michael $2,000 $167
Housekeeper $16,000 $1,333 $333
Vehicles
Gas $2,000 $167
Upkeep $4,000 $333
Insurances
Homeowners $6,000 $500
Whole life ins $8,000 $667
Auto (2 cars) $5,000 $417
Gifts
Gifts Family $18,000 $1,500
Gifts Business associates/ entertainment $12,000 $1,000
Charitable gifts $9,000 $750
Misc.
Electronics (cable, 2 devices) $2,200 $183
Vacations $15,000 $1,250
Credit cards (5.5%/10 years) $6,600 $550
Misc. withdrawals $4,000 $333
Total spending (excludes taxes) $192,000 $16,000
Rental House Expenses
Homeowners insurance $11,000 $917
Property tax $10,000 $833
Utilities $5,000 $417
Lawncare/landscaping $3,000 $250
Upkeep/repairs $2,000 $167
Total expenses (including taxes) $353,000 $29,417
Savings $29,000 $2,416
Copyright Turner Consulting LLC 2018 5
Angela and Tony Sr. - Balance Sheet December 31, 2017
Assets Total
Jointly Owned
Tony Sr.
Angela
Taxable Financial Assets Checking
$10,000
$5,000
$0
$0
Savings $50,000 $50,000 $0 $0
Cash Value Life Insurance $70,500 $0 $70,500 $0
Account receivable $100,000 $0 $100,000 $0
Trust (Beneficial Owner) $0 $0 $0 $0
Mutual Funds Muni Bond Fund 5%
$150,000
$150,000
$0
$0
Balanced Fund $150,000 $150,000 $0 $0
Total Taxable Financial Assets $530,500
$355,000
$170,500
$0
DB Pension Guaranteed Interest Fund
$750,000
$0
$750,000
$0
Total Qualified Financial Assets
$750,000
$0
$750,000
$0
Total Financial Assets
$1,280,500
$355,000
$920,500
$0
Physical Assets Primary Home
$250,000
$250,000
$0
$0
Other Real Estate $500,000 $0 $500,000 $0
Business Ownership $3,300,000 $0 $3,300,000 $0
Vehicles - Cars
$45,000
$0
$12,000
$38,000
Tangible property - Furniture - Other
$20,000 $35,000
$20,000
$0
$0
$12,500
$0
$22,500
Total Physical Assets $4,150,000 $270,000 $3,822,500 $57,500
Total Assets
$5,430,500
$625,000
$4,743,000
$57,500
Liabilities – Real Estate - Mortgage (4.5%/30 yrs) - Home Equity loan
(4.75%/10 yrs) ($100,000 line of credit)
$0 $0
$0 $0
$0 $0
$0 $0
Unsecured loans - Credit Card (21%/30 yrs) ($30,000 credit line)
$0
$0
$0
$0
Misc. loans - Auto loan - Other loans
$0 $0
$0 $0
$0 $0
$0 $0
Total loans $0 $0 $0 $0
Net Worth
$5,430,500
$625,000
$4,743,000
$57,500
1
Fact Finder Profile
For Panelists Only
George Bradford
2
George Bradford 2017 Income
George Bradford – General Manager, Adams Enterprises
$300,000
Total $300,000
Real Estate
$400,000 Home
2,800 square feet
4 bedrooms
3 baths
Auto
2016 Cadillac Escalade
Market value - $54,500
SUV
All wheel drive
15,000 miles
Background
For the last eight years 62 year-old George has been divorced from his ex-wife, Mary. Blame the break-up on time away from home with George’s unrelenting work-related travel and time at home with George’s bursts of rage. At work George’s cool and professional demeanour bottled up a cauldron of frustration that erupted at a pinprick of provocation from the family. George feels empty and needs to refill. He is empty in his family life. When Mary left she took with her a life filled with decades of familiarity, warmth and shared memories and the prospects of even happier years to come. His two children, ages 17 and 24, sided with her and made no secret of how much they resented him. He feels empty in his finances. He feels like the divorce ravaged his wealth. He feels empty in his employment situation. He feels like Tony Sr. is about to make a move. He just does not know what his situation will be when Tony Sr. retires. For all he knows he could be on the street with nothing. Finally, he feels empty in his future. He has not thought his retirement and feels unprepared. On top of all of that, George’s life was changed by a mild heart attack that he had in 2013. The episode was caught early, with medics on scene immediately and a quick ride to the hospital where doctors inserted a stent. George suffered no physical damage, but he experienced a fear that has been with him ever since. He was the major rain-maker, but permanently cut back on the number of sales calls per week. He has seen the negative impact of his decision to cut back on the Adams Enterprises revenues over the years, but feels like he had no choice. He also modified his diet for a while after the event, but is now back to his old eating habits.
3
Credit score: o George 750
Medical Protocol Medicines - George’s doctor prescribed baby aspirin, antiplatelets to prevent blood clots and statins to protect his blood vessels. George was also prescribed beta blockers (metoprolol pravastatin) to reduce his heart’s workload. George was supposed to take these pills daily but actually takes his medicine whenever he remembers—usually once or twice a week. Medical Tests – George does not remember the last appointment for a medical test or procedure that he actually kept. He does not like getting stuck with needles, making blood tests a trial. He tolerates the EKG tests, which the doctor does every time he sees George. He thinks that the preparation process for a colonoscopy is an utter waste of his time; therefore even when he goes in for the procedure his lack of prep makes the procedure a complete waste of everybody’s time. Exercise – George loves playing golf and views the nine holes he plays a couple times a month as great exercise and more importantly a wonderful way to connect with clients. Doctor Visits – When George was married, he always scheduled and kept his doctor’s appointments. His wife made sure of that. But as George grew more distance from his wife, his doctors’ appointments grew more distance from one another—until his heart attack. For the next 18 months after his event nothing was more important to George than seeing his doctor. His dedication to the doctor waned over time as he lived on without incident and the press of business weighed on him. Now every-other-year- doctor-visits are all that he can fit into his schedule. What makes the doctor visits even less enticing is the fresh lecture that George knows that he will receive every time. Group Voluntary Products, Retail Insurance Products and Legal Documents - Disability Insurance – (Group) $4,500 a month for George) - Individual Disability - $8,500 a month, own occupation - Long Term Care Insurance - no - Group life insurance - $75,000 face amount; Mary is beneficiary - Last will and testament – no - Health care proxy – no - Power of attorney – no - Individual ife insurance – Whole life policies - $750,000 face/$50,000 in cash value on
policy; Mary is beneficiary
4
George Bradford Annual Income and Spending In 2017 2017 Income
George Bradford – General Manager $300,000 $25,000
Taxes Annual, monthly weekly
$90,000
$7,500
After tax pay $210,000 $17,500
2017 Expenses
Type of Expense Annual Monthly Weekly Daily
Health Expenses Health Care premiums
$8,000
$667
Family out of pocket medical costs $1,000
$83
Club dues $25,000 $2,083
Child Support (final year of payment) $20,000 $1,667
Housing Mortgage
$21,000
$1,750
Line of Credit $7,663 $639
Property tax $9,500 $792
Utilities $3,500 $292
Lawncare/landscaping $3,000 $250
Food $4,000 $333
Vehicles
Loan $16,116 $1,343
Gas $2,000 $167
Upkeep $4,000 $333
Insurances
Homeowners insurance $6,000 $500
Whole life ins $10,000 $833
Auto insurance $5,000 $417
Disability insurance $9,600 $800
Umbrella insurance $800 $67
Gifts
Gifts for children $18,000 $1,500
Gifts Business associates/ entertainment
$2,000
$167
Charitable gifts $5,500 $458
Misc.
Electronics (cable, 2 devices) $2,500 $208
Vacations $8,000 $667
Credit cards (5.5%/10 years) $3,156 $263
Parent/Student loan $3,972 $331
Misc. withdrawals $4,000 $333
Total spending $203,307 $16,942
Savings $6,693 $558
5
George Bradford - Balance Sheet December 31, 2017
Assets Balance Sheet before Divorce
Balance Sheet at Divorce
Current Balance Sheet
Qualified Financial Assets Pension
$400,000
$200,000
$273,714
SEPs/IRAs $0 $0 $0
Annuities $80,000 $40,000 $50,671
HSAs $0 $0 $0
529 Plans $0 $0 $0
Total Qualified Financial Assets $480,000 $240,000 $324,385
Taxable Financial Assets Checking, Savings Accounts
$15,000
$7,500
$7,504
CDs $500,000 $250,000 $255,680
Stock & Bond Mutual Funds $100,000 $50,000 $73,870
Cash Value Life Insurance $50,000 $0 $0
Trust (Beneficial Owner) $0 $0 $0
Total Taxable Financial Assets
$665,000
$307,500
$337,054
Total Financial Assets
$1,145,000
$547,500
$661,439
Physical Assets Home jointly owned with Mary
$600,000
$0
$0
Home solely owned by George $0 $0 $400,000
Vehicles - car
$110,000
$65,000
$58,000
Tangible property - Furniture - Other
$90,000 $80,000
$5,000
$10,000
$40,000 $20,000
Total Physical Assets $880,000 $80,000 $518,000
Total Assets
$2,025,000
$627,500
$1,179,439
Liabilities – Real Estate (sole owned by George) - Mortgage (6%, 30 year) - Home Equity loan (7%, 10 years) - Other real estate
$0 $0 $0
$0 $0
$0
$291,900 $55,000
$0
Unsecured loans - Education Parent Plus loan (10%, 10
years) - Credit Card (21%, 30 years)
$50,000
$5,000
$40,000
$10,000
$25,000
$15,000
Misc. loans - Auto loan (8%, 4 years)
$12,000
$0
$55,000
Total loans $67,000 $55,000 $441,900
Net Worth $1,958,000 $577,500 737,539
Planning for Business Owners, Their Families, and Their Estates
Business Planning
o How do you recognize the key managers and determine what they are worth to the company both now and going forward?
Recognizing key managers Compensation issues What are they worth? The role for life insurance planning in protecting the business and as a benefit.
Employee Benefits o What are some of the tools that the tax code gives us for retaining key employees?
Value in retaining key talent Qualified benefits Non-qualified benefits
Non-qualified deferred compensation
Life insurance bonus plans
Split dollar
Business Succession Planning o What is the role of business valuation in successfully transferring a business from one
generation to the next? Does it matter whether the business is closely-held or not? Role of business valuation Distribution planning considerations Transferring the business Buy-sell planning issues and techniques Impact of family members inside and outside of the business
o What business succession issues do you see that can hinder the successful transfer from one generation to the next generation?
The impact of the decision to retain or sell on retirement income Buy-sell
Estate Planning o How do we protect the needs of the surviving spouse? Will estate taxes play a role going
forward relative to the business? Estate values
Tax structure and concerns
Capital assets
Non-capital assets o The estate is to be divided equally among the children, what does that mean? How can that
happen when some family members are in the business and others are not? Estate equalization
Family in the business
Family not in the business Irrevocable life insurance trusts
Income tax issues
Transfer tax issues Estate shrinkage Role of life insurance and annuities
Retirement Planning
o What are some ways to structure the retirement of the key owners and employees? What are some ways to fund their retirement?
Key employees Role of life insurance and other financial vehicles Pension Goodwill Qualified plans
o How can you determine whether income is adequate in retirement? Is there a way to analyze expenses in retirement?
Expenses
Living
Maintenance
Leisure Role of life insurance and annuities Income concerns – Social Security Qualified and non-qualified assets for the business owner Estate assets Business as a source of income in retirement
Health Care Planning o Are there any products or programs that will help Tony Sr. and George address their healthcare
issues in retirement? LTC asset based vs. traditional LTC policy
o What are some ways to prepare themselves to manage their healthcare in retirement? Health and long-term care risks
“A Case Study for Planning with Business Owners, Their Families and Their Estates”
Course Description: This course will allow the insurance professional an opportunity to consider the practical and technical planning issues when planning for a family estate and its related business. Discussion will include the technical design issues and considerations to include the role life insurance can have. Added value is derived from the inclusion of experienced professionals from the local community, to include an attorney an accountant and a life insurance professional.
It will assist advisors in considering or reexamining the profile of their clients’ and the personal and financial issues they need to address. Life insurance can play an important role as part of an individual’s, family’s or business’s over all financial plan. But, the need, type and amount of life insurance that may be appropriate, can only be determined through an understanding of the client’s overall position, risks and their objectives for their family and themselves. Course Objective: The primary goal of this course is to provide financial advisors with a practical view in working with their clients’ other professional advisors and consideration of the practical and technical issues the other advisors deem important in assisting clients Level of Complexity: Mid-Level Delivery Method: Taught in person by instructors. To include a moderator, an attorney, an accountant and a life insurance professional.
Planning with Business Owners, Their Families and Their Estates, A Case Study Opening Comments (20 minutes)
Meet the Planning Team o Attorney, o Accountant, o Life Insurance Professional, o Investment Advisor, o Trust Officer
Case Profile o Common planning and life insurance concerns o The impact of Family Dynamics
Highlight of major planning concerns o Estate o Heirs o Business Succession o Family Members in the business/out of the business o Key Persons
Business Planning Concerns (30 minutes)
Key Persons o Recognizing Key Managers o Compensation Issues o What are they worth? o The role for life insurance planning
Protecting the business As a benefit
o ESOP?
Employee Benefits o Value in Retaining Key Talent o Qualified Benefits o Non-Qualified Benefits
Non-Qualified Deferred Compensation Life Insurance Bonus Plans Split Dollar Life Insurance
Business Succession Planning (45 minutes)
The Role of Business Valuation
Distribution Planning Considerations
Buy Sell Planning Issues and Techniques
Estate Planning and Taxes (45 minutes)
Protecting the needs of the Surviving Spouse
Estate Values o Tax Structure and concerns o Capital Assets o Non-Capital assets
Estate Equalization Issues o Family Members in the business o Family Members not involved in the business
Irrevocable Life Insurance Trust Planning o Income Tax issues o Transfer Tax Issues
Closing Comments and Questions (10 minutes)
FSP April 2018
“Planning Concerns For Business Owners When Facing Retirement”
3 LH CE- Basic-Intermediate Level Learning Objectives: This course will use a case study approach. During this meeting participants will be confronted with many of the problems that await their business owner clients, as they are faced with the realities of their "retirement years." Family dynamics mixed in with the needs of business partners create a complex set of issues. What does the advisor need to discuss as they prepare a needs analysis and help identify and craft solutions directed towards establishing a plan that will serve the interests of all parties; the business owners, the family members, business partners and key employees.
I. Opening Discussion (20 minutes) Meet the team
The financial advisor
The retirement advisor
The long term care specialist
The attorney
Meet the Adams Family- Case Profile
The business profile
The client
The family members
The business associates
II. How Retirement Impacts Business Continuity/Succession Considerations (30 minutes)
The impact of the decision to retain or sell on retirement income
What's it worth-business valuation
Importance of valuation
Impact of having family members in and outside the business.
Buy Sell
Key employees
The role of life insurance and other financial vehicles
III. Identifying/accepting planning and financial needs in retirement (20 minutes)
Living Expenses
Maintenance expenses
Leisure expenses
Health and long term care risks
The role of life insurance and annuities
IV. Income and Benefits sources in retirement (30 minutes) A. Income Concerns
Social security
Qualified and Non Qualified Assets for the business owner
Estate Assets
FSP April 2018
The business as a source of income in retirement
B. Health Concerns
Social security
Qualified and Non Qualified Assets for the business owner
Estate Assets
The business as a source of income in retirement
V. Estate Distribution Issues and Concerns (20 minutes)
Estate equalization
Estate Shrinkage- Estate and income taxes upon death
What if new management of the business fails
The role of life insurance and annuities
VI. Tying it all together (Summary) (30 minutes)
The Business Plan
Formal Plans
Income Sources
Documents and formalities VI. Closing and Q & A (20 minutes)