The Importance of Business Succession Planning

All too often business owners are so focused on running their business that they fail to plan for its succession, or their own estate plan which inevitably has an impact on the succession of the business.  According to Bloomberg & PricewaterhouseCooper, 8 out of 10 business fail within the first 18 months and 70% of businesses never make it past the first generation. Interestingly, a commonality among the majority of the businesses that succeed – a written business plan that includes succession planning.

So what types of questions arise in the course of business succession planning? What can you start thinking about today?

First, you should consider who you would like to take over your business after you. This may be your children or it may be employees or managers within your business. You also might want to sale the business outright.

Common mistakes that are made when considering who should get the business is whether your children are even interested, or equally interested, in running the business and whether joint owner’s spouses or children will work well with the current or future owners. Life insurance policies often can be purchased to provide equality among children (one gets the business, the other the life insurance proceeds) or to buy out uninterested or undesirable heirs when one partner becomes incapacitated or dies.

Next, you should consider how you want to transfer the business.

You can sell the business outright. This can be done through selling the interest to children, employees or others. This may be a good option for those who need income from the business to use in retirement.

You can use a buy-sell agreement.   These agreements are ideal for entities with multiple owners or for those who have selected the person(s) they would like to transfer the business to. In a buy-sell agreement, a business owner can use triggering events, like retirement, incapacity and death, to begin a process for the designated successor to purchase his or her interest in the business.

You can transfer the ownership through a trust.   A revocable living trust is a great estate planning tool to assist with business succession. The business owner first transfer the business to the trust, then name’s the intended successor(s) within the trust. Prior to the business owner’s death, he or she serves as trustee and beneficiary and continues to run the business as normal.

Finally, your business succession plan needs to work in conjunction with your own personal estate plan. If the goals and objectives of these two plans do not align, your planning efforts in both areas may fail, or at least not work as intended.

The most important thing you can do for your business is to make a plan.  Delaying is the first and most common succession planning mistake.  To have a succession plan that works for your business, and family, it is important to create a plan early, then lay the groundwork to implement the plan, which often takes several years and consultations with a variety of professional advisors from business attorneys, insurance brokers and financial and tax advisors. For more information, contact us today at 720-248-7621 or  [email protected]

We have moved!!! Please visit us at our new office in Castle Rock!

CR Professional Blding Photo

It’s official! We have opened our own office in the Plum Creek Professional Building in Castle Rock, CO.

Our new address is: 201 S. Wilcox Street, Suite 102, Castle Rock, CO 80104. We share the downstairs garden level with Dr. Blaher, a chiropractor. His office is straight down the stairs to the left and ours is to the right.

All the rest of our contact information will be unchanged. We will also still be offering meeting locations around the Metro area to clients that are not in the South Metro area.

Please let us know if you have any questions.

Pets Need Planning, Too

Dogs in CB photoAccording to animal welfare organization “2nd Chance 4 Pets,” over 500,000 pets are abandoned each year due to the death or disability of their human companions. That’s 500,000 too many. What’s worse is that those pets could have been protected with just a little planning.

Think about it: what will happen to your pet if you become disabled? What if you’re no longer able to speak for yourself? How will the courts know what to do with your pet? And how can you make sure that your beloved animal doesn’t end up in a shelter somewhere or worse, alone on the streets? Because sadly, that happens all the time.

According to the ASPCA, only about 17% of dog and cat owners have taken the necessary legal steps to ensure their pets are cared for after they die.  Most of us assume that because our close family members know how much our pets mean to us, someone in the family will take responsibility for our pets after we are gone.  However, many pets that outlive their owners wind up in shelters because no formal provisions have been made for them.

How to Create a Plan to Ensure Your Pet’s Care

First, it is important that you let your estate planning attorney know that you have pets and that you want to make sure they are cared for. Your attorney can then explore with you the appropriate avenues for providing for your pets within your estate plan.  It is important to have a plan for your pet even if you do have, or do not want to specifically leave, money for the care of your animal(s).

While you can leave provisions in your Will for who you would like to have your pets at your death, an animal cannot directly own property or money because they are considered under the law personal property themselves. Thus Pet Trusts are the best option for guaranteed care of your animal companions.

While the majority of states have some form of pet trust statute, Colorado has one of the best statutes in the entire country allowing for Pets Trusts. Colorado’s statute was enacted in 1995 and allows for a pet trust to be either a testamentary trust (part of a will) or an inter vivos trust, one that is effective during the owner’s life thus covering the possibility of incapacity as well as death.

In either type of trust, to ensure there are proper checks and balances, you may want to consider naming one person to serve as trustee to handle the money, and another person as your pet’s caregiver, who would be responsible for the day-to-day care of your pet.

In your trust, you can detail exactly how your pet is to be treated – how many vet and groomer visits per year, what the pet should be fed, and any special medical needs that will require special attention.  You will need to fund your pet trust sufficiently to cover your pet’s anticipated life span, including a cushion if your pet lives longer and needs additional medical care.

For additional reading about planning for your pets visit ASPCA’s pet care page or learn about the Denver Dumb Friends League Pet Guardianship program.

If you would like more information about protecting your loved ones – including your pets — call our office today at 720-248-7621 to schedule a time for us to sit down and talk.

Laugh & Learn about the Government Shut Down, the Affordable Care Act

When trying to understand the current federal government shut down and the ins & outs of the Affordable Care Act (also commonly referred to as Obamacare), laughter may be the best remedy.   So I have compiled some sites with just information and others that will inform you while also perhaps even eliciting a chuckle.