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Comprehensive and Coordinated, Part 2

Once the proprietors are financially confident and certain they may continue to enjoy the fruits of their labor, most senior generation leaders are ready to step back and guide the next gen in a gradual transition of ownership and management responsibilities.  
 
In this case, John and Sara had plenty of life insurance and many of the requisite agreements necessary for running a successful business. However, they were woefully unprepared for retirement. Like most entrepreneurs, John and the other leaders had focused on business growth and had re-invested every dime of profit back into the operation. They leveraged current holding to acquire more land and never really considered paying themselves first. In a quest for equity growth, John and the others did not think about how, when, or even if they may ‘cash out’ of the operation and slow down someday.
 
Using a comprehensive and coordinated approach, John and Sara learned about personal money management and the idea of ensuring their own financial security before continuing to grow the operation. As a first step, we established a plan to sell John’s interest in the operating entity to the next generation at fair market value, less the partial-interest discounts. Then, with the help of their attorney, we established a sale to a defective trust (which is an advanced estate planning technique) designed to provide income for John and Sara, permanently transfer the land to the trust, and reduce their exposure to estate tax, all while allowing them to maintain control.
 
The trust they utilized was an asset protection dynasty trust which will own the land, but allow for full beneficial use by John and Sara and their descendants in the future, whether employed in the operation or not.
 
With the right combination of tools and techniques, John and Sara now have a secure retirement. They’ve sold the operation to the next generation, secured the land as a family legacy for their descendants, and substantially reduced their exposure to the estate tax. Succession planning and wealth management, they learned, are not just about money. The process is about helping people make good decisions and planning for the future. Most people appreciate a comprehensive and coordinated approach to succession planning. In the end they know a plan is designed to help achieve their goals and create a lasting legacy.