Business Succession Planning

Why Do Even the Middle Class Need Estate Planning?

When it comes to estate planning, you may think that you don’t have the wealth that would require you to engage in extensive estate planning. If you have a will, you might think that’s good enough.  Forbes’ recent article, “Why Estate Planners Aren’t Just for the Ultra-Rich,” says that nothing could be further from the truth.

estate planning for middle class
Estate planning for middle class families is important for many reasons.

Although some estate plans are more complicated than others, just about everyone can benefit from having one. Let’s examine the main reasons why:

Avoiding probate. This is a big reason why the importance of estate planning is for everyone. You don’t have to be part of the 1% to want to avoid putting your family through the stress and expense of probate. Creating a trust and strategically placing assets within its control, eliminates many headaches.

Naming a Guardian for Your Children.  Naming a Guardian for your children can only be done through estate planning documents.  In most states a will is the only document where you can legally name a guardian to raise your children.  If your estate planning documents don’t name a Guardian, the courts will name on for you, and it may not be the person you would have chosen.

Protecting your legacy. When you consider leaving a legacy for the next generation, it may have lofty pursuits. However, those aren’t necessarily reasonable goals for everyone. Leaving a legacy can also mean making certain that heirs properly respect all the effort and sacrifice that it took to save and create a retirement fund—whatever its size.

Creating a business succession plan. Among the countless small businesses in the U.S., most will continue to remain viable after the legacy owner dies. A business owner can plan for this within an estate plan, which details exactly what they want to happen, if they die unexpectedly. That could include outlining specific roles and responsibilities for surviving heirs or putting into place a buy-sell agreement with a business partner and directing the distribution the proceeds of the sale.

Be sure to revisit your estate plan regularly, especially if your life includes big events, like a birth of a child, a divorce, or an irreconcilable difference with a loved one.

It’s a myth that estate planning is something only wealthy people do. The middle class need estate planning too.  It’s for everyone.

Reference: Forbes (April 15, 2019) “Why Estate Planners Aren’t Just For The Ultra-Rich”

What Happens to a Business When the Owner Retires?

There are steps to take when business owners decide to actively engage in planning for their business to continue to thrive after they step down.

It takes time to build a business, and it can take just as long to create a strong succession plan.

MP900402613Many business owners can’t imagine a life without the business they built, so they often postpone planning for their own retirement and the sale or transfer of the business. That doesn’t work out well.

There are steps to take when business owners decide to actively engage in planning for their business to continue to thrive after they step down. This article from Forbes“Eight Factors To Consider Before Retiring From Your Business,” offers some useful tips.

  1. Plan Ahead. A good plan is to prepare, in this case, years in advance. Pinpoint the major areas that could hamper the sale.
  2. Identify A Successor. Have a detailed succession plan in place. Identifying your successor(s) early in the process will allow you time to gradually place them in their new responsibilities and give them the benefit of your wisdom and experience.
  3. Make the Business Work for You. If your business would break down the second you step away, you’re working for your business rather than your business working for you. The time to think about your exit strategy, is when you start your business, not when you’re ready to exit.
  4. Prepare an Exit Plan. Because most owners depend on their businesses for income, a lack of planning could put their main source of income at risk. It’s critical for a business owner to meet with her legal and financial team to decide on the best exit strategy. Learn your options and make an informed—rather than an emotional—decision.
  5. Keep Working After the Exit. Stay on for a few years through the exit to let your buyer have some time to transition and structure better buyout terms for you, as you help them grow through the transition.
  6. Make Sure the Systems and Processes are Solid. With processes and systems in place, a leadership change will be more likely to proceed smoothly. Any business that is successful should have these in place anyway: best practices, key performance indicators, job and responsibility descriptions and an organizational chart. Clarity for employees and managers is crucial for a transition.
  7. Delegate Responsibilities. Confirm that all logistical areas are covered, and that there are backup plans in place. Make sure the person who will be leading the business, is focused on maintaining the corporate culture during the transition.
  8. Instill Your Values During the Transfer Process.If the transfer is planned well in advance, responsibilities and value systems can be transferred to the new owners and managers. Some owners decide to maintain some shares in the business, so that they can keep an eye on—and have a say in—how the transition is taking place.

Reference: Forbes (August 27, 2018)“Eight Factors To Consider Before Retiring From Your Business”

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