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Wealth management professionals look at these issues and recommend viable solutions for managing, protecting and distributing your assets.
For example, some entrepreneurs may not integrate their retirement and other investment planning - a common approach among business owners. They invest using their company’s 401(k) plan and also invest excess personal income separately. This can result in possible inefficiencies or risk because of duplication and overlap in their equity portfolios. Many entrepreneurs, on the other hand, may set up 401(k) plans for themselves and their employees, then let them ride, ignoring the plans for years. In the meantime, the retirement strategies may become outdated. An investment management professional can help them to develop an appropriate investment strategy, mitigate risk through unified asset allocation and diversification, and rebalance their portfolios on a regular basis.
 It’s also essential to review and update your financial plans with a business succession planning professional each year. For example, small business owners may have outdated succession plans in place. A buy/sell agreement may have been established years ago, funded with life insurance that would allow the succeeding partner to buy out the other’s interest in the company.
These plans often aren’t updated. If the value of the company rises greatly and one partner dies, the insurance may not be sufficient to fund the sale of the company to the surviving partner – often resulting in part or all of the company being sold.
Business owners also should plan for the unexpected. For example, the owner is the most important asset of many small companies, so it is important for the owner to be prepared by including disability planning and insurance and his/her wealth management strategy.
Tax laws have changed dramatically in the last five to 10 years.
Planning also can ease transition and business succession - especially important for business owners since, quite often, the company is the largest single component of the owner’s family wealth. For example, some business succession plans involve establishing and transferring ownership of a company to a trust. This can help with an orderly and cost-effective transition.
Tax laws have changed dramatically in the last five to 10 years, so it’s vital to work with the appropriate tax professional to keep current on new laws and options. New laws may allow some employers to shelter personal retirement investments that might previously have been taxed - particularly if the employer is considerably older than the average rank and file employees. Further, there may be other types of plans that provide owners better benefits than a 401(k), Tax professionals may also help you develop strategies to lower your liability - for example, by shifting tax burdens to family members in lower brackets. This is especially important when it’s time to move on.
Most business owners at some point may expect to sell their companies or transfer ownership to their family. Yet they may tend to focus on growing the business without paying attention to how they’ll get out of it one day, only to then wake up 10 or 20 years later and say, “I’m tired of this – I want to do something else,” or “I want to retire.” That’s when the reality of high taxes may hit in full force. Integrated planning could have potentially helped reduced their tax burden.
A wealth management professional can help you identify the financial planning issues that are most important to business owners and their families, and then bring together a team of investment and business succession planning specialists who can help clarify your total financial picture and leverage your assets more efficiently while working with your tax professional to potentially help achieve maximum tax advantages for you and your family.
 Putting it Together
Issues to consider when you’re integrating personal and business wealth management plans:
● Take stock: What is your company’s cash flow? What are the projections for the next five, 10 and 15 years? What risks do you and your company face that could affect your assets?
● Establish goals: Be specific about your goals for wealth, retirement and other issues. Do you want to retire in 10 years and pass ownership of your company to your children? Will you exercise stock options - sell your company?
● Develop a plan: Choose debt structures that protect the value of your assets, and develop risk management and insurance strategies to protect your business and your personal estate.
● Implement, monitor and revise the plan: Keep your plan up-to-date as situations change - for example, when your business grows and your insurance needs change, when one of your children becomes an officer in your company or when you sell the firm and need to invest the proceeds.
Cheryl is a Senior Wealth Planning Strategist with Wells Fargo Private Bank. As a member of the Wells Fargo Private Bank team, Cheryl works with clients to develop customized wealth plans and implement solutions based on a thorough understanding of their personal values; asset growth and wealth transfer goals; and vision for their legacy.
For more information Contact Cheryl at 804-697-6909
Wells Fargo Private Wells Fargo Private Bank provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries.
Wells Fargo does not provide tax or legal advice. This article is for information and education purposes only, and should not be construed as tax or legal advice, which Wells Fargo and its affiliates cannot provide. Please consult your professional tax and legal advisors to determine how this information may apply to your own situation.
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