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Planning for Business Owners, Their Families, and Their Estates (A Case Study) (Provided exclusively for use by FSP Chapters)

User’s Guide

This package is designed for Chapters to use in developing an interactive, multi-disciplinary educational program. It includes a set of case facts that you can share with your attendees. This session revolves around the issues of the fictitious Adams Family. The head of the family-owned business and the owner and his wife want to retire. They have two sons, one in the business and one who is not, and a daughter whose husband is also in the business. Although this is not a true story, the family’s concerns are very real. The issues are common to most family-owned business owners. The problems and roadblocks to the successful transfer of the business from one generation to the next are those shared by many. This package was created so that your Chapter can design an interactive, collaborative, multi-disciplinary educational program using a panel to discuss possible solutions for the case. The Chapter can introduce the characters and highlight their issues and then have the panel discuss the case and offer their solutions. How to use these materials:

The case study issues are very general and broad in scope so that, regardless of future tax and legal changes, the case can continue to be used.

The issues are many and universal.

The case study can be used by different Professional Interest Sections in your Chapter for smaller group meetings.

You can make it available for presentation and discussion at business and law schools in your area.

Program Format: There are multiple formats to offer an educational program around this case study:

As a speaker presentation o Select the one topic/issue and a speaker o Send the case facts to the speaker o Ask the speaker for a presentation outline for CE filing and as a handout o Introduce the case and cast of characters at the beginning of the meeting to set the scene o Remember to keep the audience engaged and involved

Use a panel of experts o Select topics/issues and panel of experts (we suggest one from each discipline) o Send the panel the case facts o Ask the panel to coordinate their plan and presentations o Request an outline of their presentations for CE filing and handout o Introduce the case and cast of characters at the beginning of the meeting to set the scene o Remember to keep the audience engaged and involved

Role-play with Attendees o Assign different members roles from the case study and encourage them to assume the

attitudes and issues of the character o Assign different members to act as the professional advisors, each one acting on behalf of

their client’s best interests. o Introduce the case and cast of characters at the beginning of the meeting to set the scene

o Have the advisors interview the characters to determine their issues and objectives so that all the conflicts are revealed

o Discuss ways in which the conflicts may be resolved for the general good of all stakeholders o Have the professional advisors present their plan, identifying and resolving any remaining

conflicts. o Keep those members who are not participating in the role-playing engaged and involved.

Ideas for discussion topics:

Estate planning issues

Heirs

Business succession

Family in and out of the business

Key persons Financial areas relevant to the case (limited only by your imagination):

Estate planning

Key person

Employee benefits

Retirement planning

Estate equalization

Business succession

Business valuation

Intra-family relationships

Tax issues

Health insurance and preexisting conditions Potential focus areas for the case:

Business succession: A situation where the retiring business owner had not told anybody anything about their future. The financial professionals will gave the client wise advice as well as the legal documents and insurance products that he could use to bring clarity, sanity and comfort to himself, his family and his management team.

Retirement planning for business owners: Address the issue faced by many family-owned business owners and other owners of closely-held businesses: How can they retire when most of their assets are tied up in the business?

Health care in retirement: Discuss potential options for the business owner and his family for dealing with potentially costly health care in retirement, including long-term care.

Filing for CE: When you file the program with your state for CE credit, you will need to include the provided case information, a speaker’s (or panel’s) outline, and speaker bio(s). Case study video (optional): https://vimeo.com/237755761/67db649125

https://vimeo.com/237755761/67db649125

Planning for Business Owners, Their Families, and Their Estates (A Case Study)

Cast of Characters Tony Adams Sr.: Owner of Adams Family Enterprises. Angela Adams: Tony’s wife and mother of Tony Jr., Rose, and Michael. A stay-at-home

mom. Tony Adams Jr.: Tony and Angela’s oldest son. 20 years at Adams Family Enterprises.

Wants to be the heir-apparent in the business Julie Adams: Tony Jr.’s wife. Rose (Adams) Gray: Tony and Angela’s only daughter who is feels the business tension

between her father, older brother, and husband. Alan Gray: Rose’s husband. 20 years at Adams Family Enterprises and an extremely

valuable contributor. Company expert in computers and technology. Emma Gray: Rose and Alan’s daughter. Michael Adams: Tony and Angela’s youngest child. Does not work for Adams Family

Enterprises and wants money for acting school. Engaged to Heather Moss.

George Bradford: Tony’s best friend. Divorced with two children (17 and 24). 34 years at

Adams Family Enterprises and an extremely valuable contributor. He’s the company rainmaker.

Julia Murray: Angela’s mother. Heather Moss: Coopers Project Partner. Engaged to Michael Adams. Thomas Chau: Coopers Project Partner. Henry Jones: Coopers Project Partner.

Planning for Business Owners, Their Families, and Their Estates

The Client: Tony Adams Sr.

64 years old

Married to Angela (61 years old) for 40 years o Tony and Angela pay some expenses for Angela’s mother, Julia

Tony and Angela have three adult children o Son, Tony Jr., age 39

20 years at Adams Family Enterprises and the heir apparent (in his mind) to take over Tony Jr. is married to Julie and they do not have any children

o Daughter, Rose, age 38, is not involved with the Company Rose’s husband Alan Gray has worked at Adams Family Enterprises for 20 years and is

an extremely valuable contributor with computer expertise Rose and Alan have a daughter, Emma, who is 18.

o Son, Michael, age 32, is not involved in the company Rents family’s investment property for $3,500 per month under market value ($1,000) Parents pay some expenses, including food and health insurance Wants to go back to school to study acting at his parent’s expense Engage to Heather Moss, one of the Coopers Project partners

The Company: Adams Family Enterprises Tony Sr. is the sole shareholder

Coopers Project Partners are paid 5% gross from their video game

There is tension between senior management

Tony Sr. has not communicated his retirement plans or succession plan

Tony’s objectives: Phase out of business in next 3-5 years, but wants to maintain his lifestyle

Ensure that Angela is financially secure independent of the Company.

Eliminate/minimize the federal estate tax burden on his family.

Ensure continuation of the Company for the benefit of his family and the employees.

Children should be treated fairly in terms of inheritance upon Tony’s death

Determine his successor in the company between Tony Jr., Alan, George, or the Coopers Project partners

Things you need to know: The Adams’ live in a state that does not impose an estate or inheritance tax.

Adams Enterprises Five Year Historical Income Statement (In Thousands)

Revenues: 2017 2016 2014 2013 2012

· Sales of Radio Products $ 15,000 $ 15,500 $ 15,250 $ 18,750 $ 23,000

· Consulting & Service Rev. $ 6,000 $ 4,900 $ 3,750 $ 3,000 $ 2,000

· Sales of Game Products $ 2,000 $ - $ - $ - $ -

o Total Revenue $ 23,000 $ 20,400 $ 19,000 $ 21,750 $ 25,000

Cost of Goods Sold:

· Radio Products $ 10,500 $ 10,850 $ 10,675 $ 12,188 $ 13,800

· Radio Labor & Parts $ 2,100 $ 2,170 $ 2,135 $ 2,625 $ 3,220

· Game Products $ 1,000 $ - $ - $ - $ -

o Total C of G Sold $ 13,600 $ 13,020 $ 12,810 $ 14,813 $ 17,020

Gross Revenue: $ 9,400 $ 7,380 $ 6,190 $ 6,938 $ 7,980

Expenses:

· Selling Expenses $ 2,664 $ 2,100 $ 1,733 $ 1,943 $ 2,394

· Gen & Admin Expenses $ 2,950 $ 2,780 $ 2,352 $ 2,636 $ 2,075

· Depreciation & Amortization $ 200 $ 200 $ 200 $ 200 $ 200

· Officer’s Compensation $ 1,240 $ 940 $ 800 $ 800 $ 750

o Total Expenses $ 7,054 $ 6,020 $ 5,085 $ 5,579 $ 5,419

Net Income Before Income Taxes: $ 2,346 $ 1,360 $ 1,105 $ 1,359 $ 2,561

Income Taxes: $ 915 $ 530 $ 431 $ 530 $ 999

Net Income After Income Taxes $1,431 $830 $674 $829 $1,562

Adams Family Enterprises, Inc. Statement of Revenues and Expenses For the year ended last December 31

CONSOLIDATED RADIO GAME DIVISION DIVISION Revenues:

Sales of Radio Products $ 15,000,000 $15,000,000 $ ------

Consulting & Service Rev. $ 6,000,000 $ 6,000,000 $ ------

Sales of Game Products $ 2,000,000 $ ------ $ 2,000,000 o Total Revenue $ 23,000,000 $21,000,000 $ 2,000,000

Cost of Goods Sold:

Radio Products $ 10,500,000 $10,500,000 $ ------

Radio Labor & Parts $ 2,100,000 $ 2,100,000 $ ------

Game Products (1) $ 1,000,000 $ ------ $ 1,000,000 o Total C of G Sold $ 13,600,000 $12,600,000 $ 1,000,000

Gross Revenue: $ 9,400,000 $ 8,400,000 $ 1,000,000 Expenses:

Selling Expenses $ 2,664,000 $ 2,100,000 $ 564,000

Gen & Admin Expenses $ 2,950,000 $ 2,780,000 $ 170,000

Depreciation & Amortization $ 200,000 $ 90,000 $ 110,000

Officer’s Compensation $ 1,240,000 $ 940,000 $ 300,000 o Total Expenses $ 7,054,000 $ 5,910,000 $ 1,144,000

Net Income Before Income Taxes: $ 2,346,000 $ 2,490,000 $ (144,000) Income Taxes: $ 914,940 Net Income After Income Taxes (2) $ 1,431,060 Footnotes:

(1) Includes 15% for Tom, Hank, Heather (2) Transfer from retained earnings are taxed a second time at 15% Federal and State rate

Adams Family Enterprises, Inc. Balance Sheet

December 31 of Last Year

ASSETS General Assets:

Cash $ 4,000,000

Accounts Receivable 300,000

Inventories 150,000

Income Tax Refunds Receivable 10,000

Prepaid Expenses & Other Current Assets 32,000 o Total Current Assets $ 4,492,000

Fixed Assets:

Property & Equipment, Net of Depreciation $ 200,000 o Total Fixed Assets $ 200,000

Other Assets:

Investments – Real Estate $ 6,000,000 o Total Other Assets $ 6,000,000

Total Assets: $ 10,692,000

LIABILITIES & STOCKHOLDER’S EQUITY Current Liabilities:

Accounts Payable $ 250,000

Accrued Expenses & Other Current Liabilities 120,000 o Total Current Liabilities $ 370,000

Long Term Liabilities:

Notes Payables-shareholders $ 100,000

Other Long Term Debt 30,000 o Total Long Term Liabilities $ 130,000

Total Liabilities: $ 500,000 Stockholder’s Equity:

Capital Stock $ 10,000

Retained Earnings 10,182,000 o Total Stockholder’s Equity $ 10,192,000

Total Liabilities & Stockholder’s Equity $ 10,692,000

The Adams Family Tree

Copyright Turner Consulting LLC 2018 1

Fact Finder Profile

For Panelists Only

Tony Sr. and Angela Adams


Angela Adams and Tony Sr. Adams 2017 Income

Angela – Stay at Home Mother $0

Tony Sr. – President and CEO, Adams Enterprises

$382,000

Total $382,000

Real Estate

$250,000 Home (Joint tenants)

2,300 square feet

3 bedrooms

3 baths

House and Garden magazine kitchen

pool

vegetable garden Autos

Her

2016 Lexus RX

Market value - $38,000

SUV

20,000 miles Him

Jaguar leased through Adams Enterprise (not on personal balance sheet)

10 year old Ford truck

Background Tony Sr. finally understands what is going on around him at work. He is feeling the tension of his senior managers, including his son and son-in-law. Tension at work bothers him because his business gives his life such meaning. Income from the business he started has also enabled him to maintain a comfortable lifestyle and raise his children. While his son, Tony Jr. and daughter, Julie, are largely independent, his youngest son, Michael, is still trying to find his way. Tony Sr.’ wife, Angela, insists that they help Michael all that they can. After all, Tony Sr. gave jobs to the families of the two oldest children; Michael deserves his perks as well. Part of those perks have been allowing Michael to live in the family’s investment home paying rent of $1,000 a month in a property that could command monthly rentals of $4,500 or higher. They also pay some of Michael’s expenses and have offered to pay for additional graduate education. They are also paying some of Angela’s mother’s expenses, although those costs feel like less of a burden. Tony Sr. feels healthy. However, he is a tired throughout the day; more than once he has nearly fallen asleep while driving his car. He is unaware that he has mild sleep Apana. At 5’11” 280 pounds he is nearly 100 pounds over his ideal weight. A little extra weight was always fine with him and Angela until George started having his heart problems. But business issues, including those caused by declining sales, seemed more pressing that any potential health problems. Tony Sr. does not have a healthy diet.


One problem that really vexes Tony Sr. is a searing pain radiating up his left leg to his backside. He carries his wallet in his back left pocket. With his constant sitting at his desk and his lack of exercise the condition has worsened. He heard from a friend that there is a surgery that can correct the condition. He might look into it at some point.

Medical Protocol Medicines - Tony Sr.’s doctor prescribed baby aspirin, high blood pressure pills (Lisinopril-Hydro-chlorothiazide) and statins (Prevastatin). Tony Sr. regularly takes these medicines. Medical Tests – Tony Sr. takes gets tests that his doctor orders. His blood pressure is well managed. Exercise – Tony Sr. works all the time, stopping occasionally for dinners, movies and leisurely walks with his wife. He has no exercise program. Doctor Visits – Tony Sr. sees his doctor once a year. He sees no need to share details with his doctor about the little nagging stuff related to his health. Tony Sr. reasons that if there is something really wrong with him the doctor will tell him (not the other way around). Tony Sr. suspects that this is the major reason that his medical bills have been so low over the years. In his own small way he is beating the system.

Family Financial Dynamics

Shared Responsibility

Tony Sr. plots strategy for their family

Angela pays the bills on time

Angela is worried about mother’s and Michael’s finances

Credit scores: o Angela 790 o Tony Sr. 775

Group Voluntary Products, Retail Products and Legal Documents - Disability Insurance – (Group) $5,208 a month for Tony Sr.) - Long Term Care Insurance - no - Group life insurance - $595,000 face value., Angela is beneficiary - Last will and testament – cross wills -Angela and Tony Sr. are beneficiaries; Each is

executor for the other - Health care proxy – no - Power of attorney – no

- Individual ife insurance – Whole life policies on each - $300,000 face/$20,000 in cash value on each policy

Angela and Tony Sr. Annual Income and Spending In 2017

2017 Income

Angela – Stay at Home Mother $0 $0

Tony Sr. – Chief Executive $382,000 $31,833

Total Gross Income $382,000 $31,833


2017 Expenses

Type of Expense Annual Monthly Weekly Daily

Taxes $130,000 $10,833

Health Expenses Health Care premiums

$12,000

$1,000

Family out of pocket medical costs $2,000 $167

Medical premiums paid on Michael’s behalf $6,000 $500

Payments for Mother in law’s medications $12,000 $1,000

Taxes: Federal and State Taxes $31,500 $2,625

Housing Property tax

$9,500

$792

Utilities $4,000 $333

Lawncare/landscaping $2,500 $208

Food Tony Sr. and Angela $2,700 $225

Food for Michael $2,000 $167

Housekeeper $16,000 $1,333 $333

Vehicles

Gas $2,000 $167

Upkeep $4,000 $333

Insurances

Homeowners $6,000 $500

Whole life ins $8,000 $667

Auto (2 cars) $5,000 $417

Gifts

Gifts Family $18,000 $1,500

Gifts Business associates/ entertainment $12,000 $1,000

Charitable gifts $9,000 $750

Misc.

Electronics (cable, 2 devices) $2,200 $183

Vacations $15,000 $1,250

Credit cards (5.5%/10 years) $6,600 $550

Misc. withdrawals $4,000 $333

Total spending (excludes taxes) $192,000 $16,000

Rental House Expenses

Homeowners insurance $11,000 $917

Property tax $10,000 $833



Upkeep/repairs $2,000 $167

Total expenses (including taxes) $353,000 $29,417

Savings $29,000 $2,416


Angela and Tony Sr. - Balance Sheet December 31, 2017

Assets Total

Jointly Owned

Tony Sr.

Angela

Taxable Financial Assets Checking

$10,000

$5,000

$0

$0

Savings $50,000 $50,000 $0 $0

Cash Value Life Insurance $70,500 $0 $70,500 $0

Account receivable $100,000 $0 $100,000 $0

Trust (Beneficial Owner) $0 $0 $0 $0

Mutual Funds Muni Bond Fund 5%

$150,000

$150,000

$0

$0

Balanced Fund $150,000 $150,000 $0 $0

Total Taxable Financial Assets $530,500

$355,000

$170,500

$0

DB Pension Guaranteed Interest Fund

$750,000

$0

$750,000

$0

Total Qualified Financial Assets

$750,000

$0

$750,000

$0

Total Financial Assets

$1,280,500

$355,000

$920,500

$0

Physical Assets Primary Home

$250,000

$250,000

$0

$0

Other Real Estate $500,000 $0 $500,000 $0

Business Ownership $3,300,000 $0 $3,300,000 $0

Vehicles - Cars

$45,000

$0

$12,000

$38,000

Tangible property - Furniture - Other

$20,000 $35,000

$20,000

$0

$0

$12,500

$0

$22,500

Total Physical Assets $4,150,000 $270,000 $3,822,500 $57,500

Total Assets

$5,430,500

$625,000

$4,743,000

$57,500

Liabilities – Real Estate - Mortgage (4.5%/30 yrs) - Home Equity loan

(4.75%/10 yrs) ($100,000 line of credit)

$0 $0

$0 $0

$0 $0

$0 $0

Unsecured loans - Credit Card (21%/30 yrs) ($30,000 credit line)

$0

$0

$0

$0

Misc. loans - Auto loan - Other loans

$0 $0

$0 $0

$0 $0

$0 $0

Total loans $0 $0 $0 $0

Net Worth

$5,430,500

$625,000

$4,743,000

$57,500

1

Fact Finder Profile

For Panelists Only

George Bradford

2

George Bradford 2017 Income

George Bradford – General Manager, Adams Enterprises

$300,000

Total $300,000

Real Estate

$400,000 Home

2,800 square feet

4 bedrooms

3 baths

Auto

2016 Cadillac Escalade

Market value - $54,500

SUV

All wheel drive

15,000 miles

Background

For the last eight years 62 year-old George has been divorced from his ex-wife, Mary. Blame the break-up on time away from home with George’s unrelenting work-related travel and time at home with George’s bursts of rage. At work George’s cool and professional demeanour bottled up a cauldron of frustration that erupted at a pinprick of provocation from the family. George feels empty and needs to refill. He is empty in his family life. When Mary left she took with her a life filled with decades of familiarity, warmth and shared memories and the prospects of even happier years to come. His two children, ages 17 and 24, sided with her and made no secret of how much they resented him. He feels empty in his finances. He feels like the divorce ravaged his wealth. He feels empty in his employment situation. He feels like Tony Sr. is about to make a move. He just does not know what his situation will be when Tony Sr. retires. For all he knows he could be on the street with nothing. Finally, he feels empty in his future. He has not thought his retirement and feels unprepared. On top of all of that, George’s life was changed by a mild heart attack that he had in 2013. The episode was caught early, with medics on scene immediately and a quick ride to the hospital where doctors inserted a stent. George suffered no physical damage, but he experienced a fear that has been with him ever since. He was the major rain-maker, but permanently cut back on the number of sales calls per week. He has seen the negative impact of his decision to cut back on the Adams Enterprises revenues over the years, but feels like he had no choice. He also modified his diet for a while after the event, but is now back to his old eating habits.

3

Credit score: o George 750

Medical Protocol Medicines - George’s doctor prescribed baby aspirin, antiplatelets to prevent blood clots and statins to protect his blood vessels. George was also prescribed beta blockers (metoprolol pravastatin) to reduce his heart’s workload. George was supposed to take these pills daily but actually takes his medicine whenever he remembers—usually once or twice a week. Medical Tests – George does not remember the last appointment for a medical test or procedure that he actually kept. He does not like getting stuck with needles, making blood tests a trial. He tolerates the EKG tests, which the doctor does every time he sees George. He thinks that the preparation process for a colonoscopy is an utter waste of his time; therefore even when he goes in for the procedure his lack of prep makes the procedure a complete waste of everybody’s time. Exercise – George loves playing golf and views the nine holes he plays a couple times a month as great exercise and more importantly a wonderful way to connect with clients. Doctor Visits – When George was married, he always scheduled and kept his doctor’s appointments. His wife made sure of that. But as George grew more distance from his wife, his doctors’ appointments grew more distance from one another—until his heart attack. For the next 18 months after his event nothing was more important to George than seeing his doctor. His dedication to the doctor waned over time as he lived on without incident and the press of business weighed on him. Now every-other-year- doctor-visits are all that he can fit into his schedule. What makes the doctor visits even less enticing is the fresh lecture that George knows that he will receive every time. Group Voluntary Products, Retail Insurance Products and Legal Documents - Disability Insurance – (Group) $4,500 a month for George) - Individual Disability - $8,500 a month, own occupation - Long Term Care Insurance - no - Group life insurance - $75,000 face amount; Mary is beneficiary - Last will and testament – no - Health care proxy – no - Power of attorney – no - Individual ife insurance – Whole life policies - $750,000 face/$50,000 in cash value on

policy; Mary is beneficiary

4

George Bradford Annual Income and Spending In 2017 2017 Income

George Bradford – General Manager $300,000 $25,000

Taxes Annual, monthly weekly

$90,000

$7,500

After tax pay $210,000 $17,500

2017 Expenses

Type of Expense Annual Monthly Weekly Daily

Health Expenses Health Care premiums

$8,000

$667

Family out of pocket medical costs $1,000

$83

Club dues $25,000 $2,083

Child Support (final year of payment) $20,000 $1,667

Housing Mortgage

$21,000

$1,750

Line of Credit $7,663 $639

Property tax $9,500 $792



Food $4,000 $333

Vehicles

Loan $16,116 $1,343

Gas $2,000 $167

Upkeep $4,000 $333

Insurances

Homeowners insurance $6,000 $500

Whole life ins $10,000 $833

Auto insurance $5,000 $417

Disability insurance $9,600 $800

Umbrella insurance $800 $67

Gifts

Gifts for children $18,000 $1,500

Gifts Business associates/ entertainment

$2,000

$167

Charitable gifts $5,500 $458

Misc.

Electronics (cable, 2 devices) $2,500 $208

Vacations $8,000 $667

Credit cards (5.5%/10 years) $3,156 $263

Parent/Student loan $3,972 $331

Misc. withdrawals $4,000 $333

Total spending $203,307 $16,942

Savings $6,693 $558

5

George Bradford - Balance Sheet December 31, 2017

Assets Balance Sheet before Divorce

Balance Sheet at Divorce

Current Balance Sheet

Qualified Financial Assets Pension

$400,000

$200,000

$273,714

SEPs/IRAs $0 $0 $0

Annuities $80,000 $40,000 $50,671

HSAs $0 $0 $0

529 Plans $0 $0 $0

Total Qualified Financial Assets $480,000 $240,000 $324,385

Taxable Financial Assets Checking, Savings Accounts

$15,000

$7,500

$7,504

CDs $500,000 $250,000 $255,680

Stock & Bond Mutual Funds $100,000 $50,000 $73,870

Cash Value Life Insurance $50,000 $0 $0

Trust (Beneficial Owner) $0 $0 $0

Total Taxable Financial Assets

$665,000

$307,500

$337,054

Total Financial Assets

$1,145,000

$547,500

$661,439

Physical Assets Home jointly owned with Mary

$600,000

$0

$0

Home solely owned by George $0 $0 $400,000

Vehicles - car

$110,000

$65,000

$58,000

Tangible property - Furniture - Other

$90,000 $80,000

$5,000

$10,000

$40,000 $20,000

Total Physical Assets $880,000 $80,000 $518,000

Total Assets

$2,025,000

$627,500

$1,179,439

Liabilities – Real Estate (sole owned by George) - Mortgage (6%, 30 year) - Home Equity loan (7%, 10 years) - Other real estate

$0 $0 $0

$0 $0

$0

$291,900 $55,000

$0

Unsecured loans - Education Parent Plus loan (10%, 10

years) - Credit Card (21%, 30 years)

$50,000

$5,000

$40,000

$10,000

$25,000

$15,000

Misc. loans - Auto loan (8%, 4 years)

$12,000

$0

$55,000

Total loans $67,000 $55,000 $441,900

Net Worth $1,958,000 $577,500 737,539

Planning for Business Owners, Their Families, and Their Estates

Business Planning

o How do you recognize the key managers and determine what they are worth to the company both now and going forward?

Recognizing key managers Compensation issues What are they worth? The role for life insurance planning in protecting the business and as a benefit.

Employee Benefits o What are some of the tools that the tax code gives us for retaining key employees?

Value in retaining key talent Qualified benefits Non-qualified benefits

Non-qualified deferred compensation

Life insurance bonus plans

Split dollar

Business Succession Planning o What is the role of business valuation in successfully transferring a business from one

generation to the next? Does it matter whether the business is closely-held or not? Role of business valuation Distribution planning considerations Transferring the business Buy-sell planning issues and techniques Impact of family members inside and outside of the business

o What business succession issues do you see that can hinder the successful transfer from one generation to the next generation?

The impact of the decision to retain or sell on retirement income Buy-sell

Estate Planning o How do we protect the needs of the surviving spouse? Will estate taxes play a role going

forward relative to the business? Estate values

Tax structure and concerns

Capital assets

Non-capital assets o The estate is to be divided equally among the children, what does that mean? How can that

happen when some family members are in the business and others are not? Estate equalization

Family in the business

Family not in the business Irrevocable life insurance trusts

Income tax issues

Transfer tax issues Estate shrinkage Role of life insurance and annuities

Retirement Planning

o What are some ways to structure the retirement of the key owners and employees? What are some ways to fund their retirement?

Key employees Role of life insurance and other financial vehicles Pension Goodwill Qualified plans

o How can you determine whether income is adequate in retirement? Is there a way to analyze expenses in retirement?

Expenses

Living

Maintenance

Leisure Role of life insurance and annuities Income concerns – Social Security Qualified and non-qualified assets for the business owner Estate assets Business as a source of income in retirement

Health Care Planning o Are there any products or programs that will help Tony Sr. and George address their healthcare

issues in retirement? LTC asset based vs. traditional LTC policy

o What are some ways to prepare themselves to manage their healthcare in retirement? Health and long-term care risks

“A Case Study for Planning with Business Owners, Their Families and Their Estates”

Course Description: This course will allow the insurance professional an opportunity to consider the practical and technical planning issues when planning for a family estate and its related business. Discussion will include the technical design issues and considerations to include the role life insurance can have. Added value is derived from the inclusion of experienced professionals from the local community, to include an attorney an accountant and a life insurance professional.

It will assist advisors in considering or reexamining the profile of their clients’ and the personal and financial issues they need to address. Life insurance can play an important role as part of an individual’s, family’s or business’s over all financial plan. But, the need, type and amount of life insurance that may be appropriate, can only be determined through an understanding of the client’s overall position, risks and their objectives for their family and themselves. Course Objective: The primary goal of this course is to provide financial advisors with a practical view in working with their clients’ other professional advisors and consideration of the practical and technical issues the other advisors deem important in assisting clients Level of Complexity: Mid-Level Delivery Method: Taught in person by instructors. To include a moderator, an attorney, an accountant and a life insurance professional.

Planning with Business Owners, Their Families and Their Estates, A Case Study Opening Comments (20 minutes)

Meet the Planning Team o Attorney, o Accountant, o Life Insurance Professional, o Investment Advisor, o Trust Officer

Case Profile o Common planning and life insurance concerns o The impact of Family Dynamics

Highlight of major planning concerns o Estate o Heirs o Business Succession o Family Members in the business/out of the business o Key Persons

Business Planning Concerns (30 minutes)

Key Persons o Recognizing Key Managers o Compensation Issues o What are they worth? o The role for life insurance planning

Protecting the business As a benefit

o ESOP?

Employee Benefits o Value in Retaining Key Talent o Qualified Benefits o Non-Qualified Benefits

Non-Qualified Deferred Compensation Life Insurance Bonus Plans Split Dollar Life Insurance

Business Succession Planning (45 minutes)

The Role of Business Valuation

Distribution Planning Considerations

Buy Sell Planning Issues and Techniques

Estate Planning and Taxes (45 minutes)

Protecting the needs of the Surviving Spouse

Estate Values o Tax Structure and concerns o Capital Assets o Non-Capital assets

Estate Equalization Issues o Family Members in the business o Family Members not involved in the business

Irrevocable Life Insurance Trust Planning o Income Tax issues o Transfer Tax Issues

Closing Comments and Questions (10 minutes)

FSP April 2018

“Planning Concerns For Business Owners When Facing Retirement”

3 LH CE- Basic-Intermediate Level Learning Objectives: This course will use a case study approach. During this meeting participants will be confronted with many of the problems that await their business owner clients, as they are faced with the realities of their "retirement years." Family dynamics mixed in with the needs of business partners create a complex set of issues. What does the advisor need to discuss as they prepare a needs analysis and help identify and craft solutions directed towards establishing a plan that will serve the interests of all parties; the business owners, the family members, business partners and key employees.

I. Opening Discussion (20 minutes) Meet the team

The financial advisor

The retirement advisor

The long term care specialist

The attorney

Meet the Adams Family- Case Profile

The business profile

The client

The family members

The business associates

II. How Retirement Impacts Business Continuity/Succession Considerations (30 minutes)

The impact of the decision to retain or sell on retirement income

What's it worth-business valuation

Importance of valuation

Impact of having family members in and outside the business.

Buy Sell

Key employees

The role of life insurance and other financial vehicles

III. Identifying/accepting planning and financial needs in retirement (20 minutes)

Living Expenses

Maintenance expenses

Leisure expenses

Health and long term care risks

The role of life insurance and annuities

IV. Income and Benefits sources in retirement (30 minutes) A. Income Concerns

Social security

Qualified and Non Qualified Assets for the business owner

Estate Assets

FSP April 2018

The business as a source of income in retirement

B. Health Concerns

Social security

Qualified and Non Qualified Assets for the business owner

Estate Assets

The business as a source of income in retirement

V. Estate Distribution Issues and Concerns (20 minutes)

Estate equalization

Estate Shrinkage- Estate and income taxes upon death

What if new management of the business fails

The role of life insurance and annuities

VI. Tying it all together (Summary) (30 minutes)

The Business Plan

Formal Plans

Income Sources

Documents and formalities VI. Closing and Q & A (20 minutes)