Wealth That Outlives You
- Apr 7
- 3 min read
By Jennifer R Lee, AWMA®, AIF®
Financial Advisor
Wealth that outlives you. Isn’t that the ultimate legacy? For me, and for many of the business owners I work with professionally and know personally, it is. As entrepreneurs, we spend our lives building systems, businesses and wealth. If we are successful, we positively impact our employees, our communities, and of course, our families. If we do it right, with continuity and legacy in mind, we build something sustainable for generations.
I’m not going to tell you this planning is easy - it’s not. Many owners would rather stick their heads in the sand than face the nuances of transitioning away from a business or creating an estate plan that could last generations. I believe it’s worth the effort and the exploration.
It may involve tax strategies anticipating an exit, generation-skipping gifting, selling the business but retaining the building, or working in the business as a consultant for a period. There is much to consider.
Many families lose control of their wealth because it’s too late to plan: a market shift leaves a business out of favor, someone key to the organization passes away, or systems, job descriptions, training and culture are left unattended. Sometimes a buyer comes along unexpectedly, and the expeditious nature of a sale leaves owners with limited tax-saving vehicles. The way you receive payments, their timing, your business entity structure, charitable donations, and transferring assets to family at a reduced value can all offer tax advantages. Planning 4-5 years in advance allows you to establish pension plan options that protect substantial income and help ease worries about your net financial position. Thinking ahead is part of protecting your most valuable resource - your business.
Often the most challenging part of my work is getting business owners to contemplate these realities. They’re busy, and financial planning is important, but it’s not urgent…until it is. I often ask them to write “family love letters.” In the midst of their complex, busy lives, I ask them: If you had to make one last phone call to your spouse, child or business partner, what would that person need to know? What would they need to know about closing, selling or continuing the business, traps to avoid and whom to trust? CPA, attorney, advisor, friend? Not to mention communicating your values, hidden cash, prized possessions and your overall legacy.
Key elements to consider when stepping away from your business include:
What is my number? This is a valuable exercise. Knowing what you need from the business to exit financially lets you either enjoy the freedom of knowing you’ve already reached it, or to set a plan to meet your goal. If there’s no wealth gap, you can proceed with evaluating an exit strategy. If adjustments or increased revenues are needed, you can set a course to reach your target and actively pursue it.
Can you mentally detach from the business? The business is your creation, and letting go may prove difficult. Are you emotionally ready to step away and trust others to carry it forward?
Have you documented processes and systems? Maximizing your business' value requires careful attention to tangible assets, intangible elements, well-defined processes and sustained profitability. Ensure that processes, models and key knowledge are clearly documented.
When clients consider leaving a business for retirement or a new adventure, the questions usually involve the valuation of the business, what you need financially to move on, whether the business is at peak purchasing value, and what, if anything, you can do to elevate it. Doing this work thoughtfully ensures that the wealth and values you’ve built continue to benefit those who matter most.
Discussions should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through Cambridge Investment Research, Inc., a registered Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Modern-Wealth, LLC and Cambridge are not affiliated.
Connect With Jennifer
Comments