You are not just running a business — you are nurturing a dream and building a legacy. Whether you are an entrepreneur, a new small business owner or taking over the family business, incorporating a wealth planning professional into your financial strategy is critical.
“As a business owner with a company to protect, a wealth adviser can create a wealth plan that aligns the complexities of business ownership and succession objectives with your unique personal goals,” says Bethany Bryant, CPA, Regional Managing Director of Glenmede, a boutique wealth management firm.
“Through comprehensive and customized planning, you can manage and grow your wealth while building the framework needed for a long-lasting legacy,” she says.
Smart Business spoke with Bryant about how a wealth plan can empower you to live the lifestyle you desire and create a plan that incorporates transfer, governance and succession into the legacy you want to leave behind to ensure the ongoing wealth of your family and the continuity of your business.
What considerations are important in a wealth plan?
The process starts by understanding the degree of your financial independence, risk tolerance and ability to meet your lifestyle goals throughout your lifetime, and begin considering your legacy and philanthropic goals that will be carried into the next generation. Many details, including the structure of your business, cashflow sources and needs, tax considerations and estate planning opportunities, should be reviewed to determine their impact on your probability of success as you define it.
Whether you seek to maintain and grow your business, pass it on to a subsequent generation or sell to a strategic or financial buyer, thinking about ownership structures separate from control of the business may result in more effective tax and estate planning techniques.
How do individuals start the planning process?
Begin with your current personal balance sheet for a consolidated picture of your current assets (e.g., bank accounts, stocks, mutual funds, real estate and retirement accounts), liabilities (e.g., mortgages and future taxes on deferred compensation) and net worth. Your balance sheet is the baseline for the planning process.
Identifying personal wealth goals is more manageable when you break them down into three major components:
- Lifestyle — Having enough money to support short-term goals and long-term lifestyle needs.
- Legacy — Transferring assets and values to subsequent generations.
- Philanthropy — Determining the best approach to funding philanthropic interests.
A lifestyle component can help you get through your retirement years the way you want to. Often for business owners, the majority of wealth is tied up or reinvested in the business, leaving little liquidity in assets outside of the business to fund your lifestyle.
A comprehensive wealth plan incorporates your legacy goals after death, including how and when those assets will cascade to subsequent generations and what happens to your wealth. Lastly, your philanthropic goals should be part of that plan incorporating how to structure gifts that make the most impact and align with your values.
How can a wealth planning professional help you achieve your goals?
Too many advisers just plug numbers into a template and don’t take into account the complexities and potential variables of an individual’s situation.
Ask your wealth adviser to assess the probability of meeting your goals by testing them along with your personal balance sheet in various market environments and scenarios around your business assets. This will help determine your risk tolerance and probability of success, and may prompt you to refine your original plan.
Wealth plans are not one-and-done. As your life and family evolve, your business is cyclical, and markets and tax policies change — so should your wealth plan. Periodically reviewing your personal wealth goals and financial details will help you remain positioned for long-term success. ●
This article presents general information and is not intended to be financial, investment, tax, legal or other advice. It contains information and opinions which may change after publication. Views expressed herein do not necessarily reflect the views of the author’s employer. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Readers should consult with their own financial, tax, legal or other advisors to seek advice on their individual circumstances.
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