JK Lasser's New Rules for Estate, Retirement, and Tax Planning, 6th Edition
by Stewart H. Welch III, J. Winston Busby
CHAPTER 14Succession Planning for the Family Business or Farm
If you are a business owner, health care practitioner, or farmer, you'll have to contend with special challenges as you work to preserve your assets for your heirs. To simplify our discussion, we will refer to anyone who falls into any of these three categories as a business owner. As a business owner, you're probably so involved in the day‐to‐day demands of running your business that you haven't really thought about succession planning. Unfortunately, too many people don't plan properly, and as a result, the value of their business is seriously diminished. A couple of typical cases show how important advance planning can be.
Case Study 1
Bill Johnson, a divorcee, owned a small precision manufacturing company that had an estimated value of $6 million. He had spent his entire career building this successful company, which represented the bulk of his net worth. He was grooming his daughter, Elizabeth, to take over the company when he retired. Bill also had two other children who were not involved in the business. Unfortunately, he died suddenly, leaving his estate to the three children equally. Elizabeth was now in business with her two siblings, and she was a minority stockholder. Although Elizabeth's siblings had little interest in the business, they felt they deserved an income from it because, after all, Elizabeth received a nice salary. Together, the two siblings owned a majority of the voting stock, and they ...