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Bank on It

Don’t Forget Personal Planning


As a successful business owner, you have probably already prepared a business succession plan, a management succession plan, and buy-sell agreements. In all likelihood, you have also coordinated your business plan, prepared your projections for future growth, and have updated your strategy periodically to accommodate the ongoing changes within the business and market.

Business succession planning is the process by which you determine how your business will continue when you are no longer at the helm. It serves as a guide for your successors to continue your legacy and implement a plan that reflects your aspirations in effectively managing the company, with the least possible conflict. The plan may serve other purposes as well, for example, helping to secure family financial interests in the business and delineating strategies that will significantly reduce the impact of estate taxes in the event of your passing.

The reality check is whether you have applied the same disciplined approach utilized in your business to your personal succession plan. Many business owners and executives unfortunately have not.

Most business owners easily establish their management succession plan and identify and groom their successor. However, too often they fail to apply the same process to their personal wealth, especially in relation to protection strategies during life, in the event of incapacity, and upon death.

Protection Strategies

One protection strategy is ensuring that every asset is properly titled. You may think that your assets are owned by your trust or are governed by your will. However, if there is a beneficiary designation (i.e., life insurance or, an annuity, jointly held by another party), it bypasses your will or trust. As a result, it may not carry out your original intent. For this reason, it is important that you and your financial adviser verify which form of ownership applies to every asset and liability to ensure that each is titled correctly.

Another strategy may involve creating a revocable living trust and naming a successor trustee. As with your business successor, it is recommended that you involve your successor trustee early in your financial affairs and share your personal goals, situation or feelings to avoid any misunderstanding when he or she performs as your trustee. Other protection strategies may include drafting a durable power of attorney, a legal document that allows you to designate another person to handle your financial affairs in the event of incapacity.

Your business interest may be the biggest part of your estate, but it is not the only component. You may own other assets, such as your home and other real estate, stocks, bonds, mutual funds, individual retirement accounts (IRAs) or other retirement plans, life insurance, annuities, savings accounts and personal possessions. Consequently, the need to coordinate your business and personal assets in your overall estate plan is critical. An effective, comprehensive estate plan integrates your business and personal objectives and establishes clear strategies to help you accomplish them.

Same Discipline, Equal Success

Many of the same strategies used in managing your business can be applied to managing your personal wealth. As with business planning, personal financial management requires identifying the desired outcome, establishing a detailed plan of action, and then consistently following through. Incorporating a similar approach and discipline to both your business succession planning and personal planning, will lead to greater peace of mind and success for you and your future generations.

Finally, just as you would speak with a business adviser when starting up and managing all the aspects of your business, it is important that you seek assistance from a qualified professional who understands your unique needs as a business owner or professional. When selecting your personal wealth adviser, consider his or her background and ability to identify and develop wealth-management solutions in areas such as investment management, fiduciary services, banking, insurance and financial planning. You deserve even more targeted attention in the arena of personal financial planning than in business succession planning.

Don’t forget to plan for yourself, too.

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Hawaii Business,June