A Closely Held Business: Combining Effective Family and Financial Planning
Challenge: After 30 years of hard work, the head of a successful family business wants to retire so that he and his wife can spend more time traveling and enjoying their grandchildren. There is concern with protecting the company’s future and transferring the business to their son, while treating their daughter fairly. The company experiences impressive growth and profits each year, but there is little focus on succession planning or retirement planning for the business owner.
The Canal Capital Solution: The solution is twofold: First, we complete a comprehensive financial plan to address the owner’s concerns about retirement, future cash flow, and transitioning the company. Second, we identify opportunities to achieve significant tax savings for the business, while using benefit programs to create incentives for the owners and key employees. By aggregating investments and lowering fees, we are able to provide the client with objective financial guidance. As a result, our clients are able to:
- Amend current 401(k) plan and add a cash balance plan to retain the top talent and provide confidence in continued business success. The plans also allow the husband and wife to tax deduct $400,000 annually, which saves them over $180,000 in taxes each year and makes up for lost ground on their retirement savings.
- Segregate the real estate assets from the business assets, which create a nice revenue stream for the husband and wife well into retirement.
- Establish a succession plan for the family which:
- Minimizes estate taxes
- Passes a portion of the business to the son now and a portion over time
- Equalizes the estate inheritance with the sister
- Aggregate the parents’ and children’s personal investment accounts to create an Investment Policy Statement, which provides the following:
- Consolidated reporting and performance for all accounts
- A very modern and methodical process for managing money
- A significant reduction in overall fees by aggregating family assets under one umbrella
- Have security in retiring and the flexibility to focus on day-to-day operations until then.