Baby Boomers: Prepare Now or Risk Losing the Family Business

Suzanna DeBaca -- Expert Business Source, 3/5/2007 12:39:00 PM

As recently as 2004,  Insurance Journal estimated that approximately $40.6 trillion will change hands by the year 2052 as Baby Boomers and their parents pass on their accumulated assets to their heirs.  A portion of that wealth transfer will be due to the death or retirement of the owners of closely held or family businesses. 
Boomer business owners: Have your parents included the family business in their estate planning?  If not, the government may be the one inheriting your parents’ assets.

The Baby Boomer population (individuals born between 1946 and 1964) must prepare for this staggering transfer of wealth, both in their personal lives and in family businesses. While many Boomers expect that they will inherit their parents’ assets outright, including the family business, many have not considered the factors that could significantly reduce those assets.  Estate taxes, the cost of health care, extended life expectancy, and reduced social security benefits can diminish your parents estate, and in many instances threaten the survival of a family business.  

What can you do to prepare?  The most straightforward thing you can do is talk to your parents.  While it may be difficult to bring up the subject of wealth transfer, you can easily discuss your concern for your parents’ care, wellbeing and wishes in retirement and bring up estate and charitable planning in the process.

Here are several questions you may want to ask your parents to make sure they have begun preparing for a transfer of management and ownership of a family business, as well as for their retirement years:

1. How do they envision their lifestyle in retirement, and how that will be funded?
2. What are their wishes for long-term care, should they become incapacitated?
3. What are their charitable desires, and how do they wish for them to be fulfilled?
4. Have they considered who will take over the business and how that person or team will be trained?
5. Have they discussed estate planning issues with the proper advisors?

By asking those questions now and creating a strategy with their parents, Baby Boomers can lay the groundwork for a smooth transfer of assets and for the future success of family businesses.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 7 Hanover Square, New York, NY 10004, (888) 600-4667.  Securities products/services and advisory services are offered through PAS, a registered broker/dealer and investment advisor. Private Capital Solutions Group is not an affiliate or subsidiary of PAS.
                                                                                      PAS is a member NASD, SIPC.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.