Why wealth management and succession planning should be done together

Business owners are accustomed to reinvesting their capital back into their business. But as they contemplate their eventual exit from the company that they’ve built and grown, they should make sure that they have a personal investment strategy that can fulfill their individual and family’s financial goals.

As an owner begins assembling their succession plan, they have a great opportunity to start investigating the use of wealth management services to address important pre-sale financial planning questions, such as whether they’ll receive enough from the sale of their business to fund the lifestyle they want for their family while taking into account any taxes that may be due.

“Speaking with a wealth management professional and estate planning attorney early on in the succession planning process will help owners take advantage of significant tax planning strategies,” says Denise Glinatsis Bayer, Esq., VP, Senior Trust Officer, at Premier Bank. “It will also help ensure their financial plan and estate plan go hand in hand.”

Smart Business spoke with Bayer about figuring out the right wealth management strategy for business owners who are succession planning.

What wealth management strategies should owners consider while succession planning?

An owner will want to have a wealth management plan that includes an asset allocation and investment strategy that addresses what the owner will do with the proceeds from the sale so that both their financial goals and estate planning goals are met.

Wealth management strategies that owners might consider ahead of an exit event could include funding a revocable trust, or general tax planning within an investment account to get a mix of taxable and tax-free items to leverage tax-efficient investments in taxable accounts, and harvest any capital losses.

Within the wealth strategy part of the investment planning, owners should look at what type of cash and short-term, high-quality fixed income could be put into their financial plan while they’re still part of ownership to make sure that they have a diversified portfolio that fits well with their risk tolerance.

When should wealth management planning begin?

It’s never too early to begin personal wealth planning. Business owners should have their wealth planning goals in place, or at least begin discussing them, well before they’re thinking of sale or transition.

The exit plan strategies should start with a valuation of the business at least five years prior to the consideration of the sale. If an owner waits until after the transaction, then they might not have taken into account their entire income and spending needs, all of their short- and long-term goals, or they might not have an asset allocation that meets their family’s objectives over any volatility in the market, which would be a big problem. Waiting too long may mean they miss out on any estate, tax, or gift planning strategies that could cost them in the long run.

Who should business owners work with on their wealth management plan?

Business owners should work with a trusted fiduciary or wealth advisor, as well as an estate planning attorney to help create those trust vehicles that might alleviate any tax implications. As an owner gets closer to the sale, they’d also want to enlist their corporate or transactional attorney to help facilitate the sale and the day-to-day documents that are associated with it. They’ll also want a qualified business valuation expert or appraiser. A key advisor is the owner’s CPA, as they likely have the most regular contact with the owner and understand the business’s day-to-day operations.

Business owners should connect with their trusted advisors for wealth planning discussions sooner rather than later because it could mean a better sale price due to timing, greater tax savings, and greater assurance that the transfer of wealth from their business to their family truly fits their needs and goals. It also makes it more likely that all of the hard work and goodwill that they’ve put into their business will continue on long after they’re no longer at the helm. ●

INSIGHTS Banking & Finance is brought to you by Premier Bank

Denise Glinatsis Bayer

VP, Senior Trust Officer


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