Case Studies

Pete, Age 50,
Sole Owner of Architectural Design Firm

Pete is married with four children and his business worth approximately $1 Million. His primary value is goodwill and he has no apparent successor. He hopes to sell his business to obtain retirement income. He has minimal retirement savings.

How can Pete comfortably retire even if no buyer for his business materializes? How can he provide for his family if no buyer materializes?

He should focus on building  his business and recruiting a potential successor.

He should plan now to secure his retirement. We would suggest he Implement a qualified retirement accumulation strategy and protect against unexpected events, through the purchase of personally owned insurance covering death or disability.

Ron, Age 60,
Owner of Large Auto Dealer

Ron is divorced with three children and one son active in the business while others are not. He has a total estate of $6.5 Million with the business worth about $4.5 Million.

How can Ron ensure that non-business heirs are treated equitably? That the business is not impacted by estate taxes? That his key employees stay with the business as mentors to his active son? That Ron can remove assets from the company to build his own retirement fund on a tax-deductible basis?

Ron can avoid family disharmony through an Irrevocable Life Insurance Trust (ILIT) – owned life insurance to provide funds to treat non-business children equitably. He can retain his key employees with an executive benefit plan so they will be there to mentor his son. Finally, he can build external wealth on a tax-deductible basis by implementing a defined benefit retirement plan. Plans can often be designed to maximize his share of annual contributions and minimize the cost for other employees.

George, Age 54,
Part Owner of a Cardiology Practice

George is a physician and one-third owner of the practice worth about $3 Million. There is an existing buy-sell in place. Susan is a junior cardiologist who George would like to retain in the practice. They are also concerned about asset protection issues.

The solutions for a physician are very similar to other business owners. A properly funded buy-sell agreement can provide for a buy-out either at death or during lifetime. A combination profit sharing and defined benefit plan can maximize contributions on behalf of George and assets will be protected from malpractice creditors. An executive benefit plan can be designed to retain Susan and preserve the value and profitability of the practice.

Larry, Age 67,
Owner of a Professional Engineering Firm

Larry, age 67, is a Professional Engineer with a business worth about $4 Million. He is late thinking about a succession plan or even planning for his retirement. His son is his named successor and they have 20 full time employees other than themselves. Larry wants to finance the sale of his business, secure his son’s position, retain all of his employees and minimize his taxes paid on the sale while maximizing the tax-deductibility of the bank financing.

George’s solution is the sale of his stock to an Employee Stock Ownership Plan (ESOP). In a properly structured transaction, George will pay no capital gains tax on his sale proceeds and the business will be able to deduct both principal and interest on the bank loan if paid back through the ESOP. His son will maintain control of the business after the sale and can keep or wind down the ESOP ownership of stock over time.

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These are hypothetical situations and the opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.