Succession Planning

James owns and runs a construction company. His oldest son, Greg, has been working with James in the family business for the past 10 years. James eventually wants Greg to take over the family business. James is married to Julie and he wants to be sure she will be taken care of in the event he passes away before she does. However, in addition to Greg, James and Julie have two other children, neither of which work in the construction company. James came to see us because he wanted advice on how to best accomplish these goals.

First, we sat down with James and Julie to discuss their goals and concerns. During this meeting we also discovered that neither one of them had a will or any other estate planning in place. Therefore, we not only addressed the issue of business succession, but also their personal concerns. Then, we advised James and Julie on how to structure an estate plan and business succession plan that worked together in order to accomplish their goals.

In order to do so, we created a business succession plan which included drafting a “Buy-Sell” agreement and an Irrevocable Life Insurance Trust (ILIT). James purchased life insurance on himself and named the ILIT as the beneficiary. This enabled Greg to buy his father James’ share of the business from the estate and ultimately fund the purchase of his siblings’ shares with cash. We also drafted a power of attorney solely for the business that would allow Greg to operate the business in the event James was incapacitated.

Finally, we addressed the couple’s estate plan by creating a revocable living trust. We designed a comprehensive plan so that if James dies before Julie, she would still receive income from the business through the trust and then, after they both are deceased, the trust will divide or split into three equal shares for their children. Had James passed away without this planning in place, the business would most likely have to be sold in order to give each child a one-third share, ruining Greg’s chances of following in his father’s footsteps. We also recommended that the family hold a meeting to review their new estate plan so everyone would know what to expect.

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