Follow Dallas Linkedin
Email Dallas Email
Financial
Mar 15, 2018

Estate Planning: A Small Slice of a Bigger Pie

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

Business owners commonly associate exit planning with estate planning, and they aren’t too far off.

Good exit plans and estate plans both aim to ensure that the owner’s family is provided for after the owner is gone. Both an exit plan and an estate plan might address a transfer of ownership to an intended recipient following the death of the business owner. 

But one thing that owners may overlook when committing to estate planning is the notion of transferable value. While transferring ownership can be relatively straightforward, creating transferable value so that an ownership interest carries the benefits the owner hopes for can be a greater challenge.

Transferable value is the value a company has without its owner, and it’s incredibly important to consider when we are looking at what ownership is expected to provide once it’s transferred through an exit plan or estate plan.

It’s this aspect that makes estate planning a small but significant slice of a larger planning pie.

Estate plans focus on transferring assets upon an owner’s death. They typically assume that the owner will live past his or her expected exit date and thus have the opportunity to transfer all assets as planned.

But what happens when an owner dies prematurely? What happens when the business - which is most likely the most valuable asset to be transferred - relies so heavily on the owner’s presence that its value plummets when the owner dies? How can you help your family receive real value rather than just ownership rights?

That’s where exit planning picks up the slack, because exit planning focuses on three key elements that estate plans often overlook:

  • Transferable value: Exit plans include action items to help ensure that the business runs smoothly whether the owner lives, dies or becomes incapacitated.
  • Financial security: Exit plans implement strategies to give owners the best shot at financial security regardless of the unexpected.
  • Choice of successor: The exit planning process encourages owners to choose a successor long before the business needs that successor.
Estate plans may presume survival and integrity of business value, whereas exit plans anticipate the unexpected. When the unexpected occurs, businesses with strong transferable value (i.e., those businesses that don’t rely entirely on the owner’s presence) usually position themselves to deliver greater value to the owner’s family.

Businesses without transferable value tend to die along with their owners, which can cause much-needed financial security for the owner’s family to evaporate. For owners who derive most of their wealth from their businesses, the exit plan’s emphasis on transferable value can be a critical component of a successful estate plan.

If you’d like help incorporating your estate plan into the larger pie of exit planning, contact us today. We have experience in helping owners establish the processes they need to give themselves and their families an opportunity at financial security, regardless of the circumstances.

© Copyright 2018 Business Enterprise Institute, Inc. All Rights Reserved

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email [email protected].
 

Other Posts from Dallas Romanowski

Bizjournalblockad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Cfss headshots parker robert webversion 21422121214

North Carolina's 2023 Hurricane Season Predictions: Harnessing the Power of Solar Energy and Storage for Optimal Resilience

Robert Parker - Cape Fear Solar Systems
Adamshay 300x300

Will ChatGPT Do My Taxes Next Year?

Adam Shay - Red Bike Advisors
Chris coudriet

A Public Service Profile on Communicating Better with our Community

Chris Coudriet - New Hanover County Government

Trending News

For 348-townhome Project, Carroll Companies Reschedules Community Meeting

Staff Reports - Sep 25, 2023

Crossing That Bridge (and Road, Track, Sky And Water)

Cece Nunn - Sep 25, 2023

Culinary Blends At New Olivero Restaurant

Katie Schmidt - Sep 25, 2023

SeaTox, Partners Awarded $1.5M Grant For Contamination Testing In Alaska

Audrey Elsberry - Sep 26, 2023

Bowling, Murphy Join EmergeOrtho Coastal Region

Staff Reports - Sep 26, 2023

In The Current Issue

MADE Winners: Manufacturer Category

Golf products, biodegradable packaging and ophthalmic devices eye success....


MADE Winners: Functional Product Category

Skin care products, bean bags and lumber function at the top of their game...


Trail Clear For Sunset Beach Development

That project involves making a cascade of improvements to Sea Trail Plantation, a 2,000-acre golf and country club development located near...

Book On Business

The 2023 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2023 Power Breakfast: Major Developments