The Background

Bill and Karen are in their mid-60’s.  They have two adult children, ages 29 and 32.  The 29-year-old is on the autism spectrum and may need assistance in managing his financial life, while the 32-year-old is on the fast track at a known tech company, planning to have her first child within a year or two and already financially successful. Bill is planning to retire from senior management at a Fortune 500 company within the next 12 months.  He has stock options, deferred compensation, and structured bonus income that will continue to pay out over the course of 5 years after his retirement.  He also has a 401K and rollover IRAs.

Karen took over a business from her Dad and she has grown it substantially.  As chief cook and bottle washer at the company, Karen is overwhelmed with the enormity of her roles. She wants to stop working nights and weekends and start thinking about positioning the company for sale within 5 years. The company currently employs about 40 people. Neither child has the interest or ability to take over the company.  Two of Karen’s employees have repeatedly expressed interest in taking over the business, but Karen questions their resources and ability to complete a transaction without Karen financing 100% of the sale.

Bill and Karen both have 401Ks and substantial investment accounts held with one of Bill’s college classmates at a national investment firm. They are paying 1% for investment advice only and not receiving any tax, estate or financial planning guidance.

They have simple wills that were created years ago right before they went to Australia for one of Bill’s company trips.

They have legal relationships with the attorney who did their home closing, another for Karen’s few and far between business legal needs and yet another who drafted their wills some 20 years ago.

Their CPA is the same CPA who did the accounting and tax work for the company when Karen’s Dad owned the business and does not offer much in the way of forward thinking or pro-active tax or business planning advice.

Because Karen is interested in selling the business, it was imperative that the value of the business be established. This valuation is also needed in the event of Karen’s pre-mature death for estate tax planning.  It turned out that the value of the business was higher than they had expected and was now the single largest asset on their balance sheet.

The Process

We made a recommendation to upgrade their CPA relationship to one offering pro-active tax and business advice.  The firm helped with the business valuation, getting the books and records in shape for a potential buyer’s review over the ensuing years, and setting up the systems and processes for Karen to delegate some of her work and get her nights and weekends back to spend more time with Bill after he retires.

We designed a comprehensive estate and legal plan that has accomplished many objectives:

• Death Tax reduction.
• Protection for their child with special needs.
• Divorce protection for their financially successful child and future grandchildren.
• Provided more effective alternative beneficiary designations for their substantial retirement and benefit plan balances for asset protection and income tax planning for their children or grandchildren.
• Business succession, including employment agreements and retention bonuses with key employees in the event of Karen’s pre-mature passing or disability. This plan also included bonuses for their key people to assist with a sale of the company over the next 5 years.
• We recommended a local law firm to draft the documents for both the business and personal needs for the family.

We discovered significant gaps in their personal and business insurance plans and introduced them to a new insurance agent who can serve their protection needs properly rather than one looking to compete with Geico for the cheapest coverage.

We replaced their large firm investment counsellor for the same cost they paid him and will now receive asset management PLUS ongoing pro-active advice to keep their taxes low and their entire financial house in good order going forward.