Securing Your Family Business’s Future

Tab 1

June 11, 2015

Conversations about how to manage family wealth involving a family-owned business may help map out the company’s future and manage the expectations of individuals involved in the company. 


Family discussions ought to take place regularly to create financial strategies that take the long-term desires of the entire family into account.


Kenan Askoz; illustration by Joel Kimmel
Scott Winget; illustration by Joel Kimmel

How can an estate plan set aside financial resources for a family business?

WINGET: A good estate plan can help mitigate estate taxes and manage the income tax characteristics of the assets, including the cost basis, for the owners. It blends a plan for the business and the family by anticipating and providing a source of liquidity for estate taxes as well as a management and ownership strategy.

AKSOZ: It’s very important to have an estate plan in place. That’s because for most entrepreneurs, the business itself is the largest asset they own and usually the source of funding for the family’s cash flow and most of their life events. Having a road map in the form of an estate plan can make the succession and transfer of a business much more efficient for the family.


How are trusts leveraged in a multi-generational business?

WINGET: Trusts are typically used in three cases. When family members are not active in the business, a trust can help own and manage the business asset. Another potential benefit comes in the form of asset protection — guarding against creditor risk from lawsuits, divorces and the like. Lastly, it can be an effective way to help keep a business within the family, if that’s a long-term goal, over multiple generations.




Learn more about Kenan Aksoz and Scott Winget.


With a business likely to be passed on to a second or third generation, how can heirs take part in succession planning?

WINGET: Be proactive. Heirs should discuss their individual goals with the current ownership and management. They should find out what’s required in terms of experience or education for any positions they’re considering.

Tab 2

June 11, 2015

Building relationships with the current ownership is very important. Heirs can help the existing owners define goals in a written management and ownership succession plan that may be beneficial to all stakeholders.


AKSOZ: One of the most common sources of dispute among family members is related to a lack of understanding about the difference between being a shareholder, a director or an employee of the family business. Each of those functions has different authority, oversight responsibility and compensation.


Documenting these roles and players in a succession plan can help mitigate heartbreak among family members. There needs to be a lot of education and setting of expectations for each function. Seeking the advice of an outside advisor who is an expert in this area can pay a lot of dividends down the road. 

The advisor can provide an objective and realistic view for the entire family.


Which transfer tools potentially minimize the tax burden on family-owned companies?

WINGET: The family and business have to decide what direction they want to go with the company and how the family wants to be involved in the business going forward. They should answer questions about their vision for the business itself before they start talking about tax strategies.


But, assuming the owners have a taxable estate, there are many tools that can create discounts in valuation of the business. One method is to recapitalize the stock into voting and nonvoting shares. Nonvoting stock offers less control, creating a valuation discount for wealth transfer; and then, there are many ways to leverage that discount in how you structure the transfer.



Tab 3

June 11, 2015

AKSOZ: The approach and tools used for one family may not be right for another. Whoever decides which tool is best needs to understand the business itself and work with their tax and legal advisors so that the tool is used in the right context.


If the owner thinks he or she might sell, how does that impact estate planning?

WINGET: Plan for that sale far in advance, and determine how to best position the company to get the greatest price possible. Otherwise, it could end up costing more in income and estate taxes. If the business is large enough, think about what it means to shift from a business family to a financial family. That will require a different strategic plan and mission.


AKSOZ: A large influx of liquidity can change family dynamics. How the money is going to be managed and spent needs to be discussed. 

Succession planning, estate planning and strategic business planning should all happen in concert so that they are aligned with the family’s goals.


In transferring ownership, what is your main advice for making the transition as smooth as possible?

WINGET: Begin as early as possible — start a few years in advance, because the transition can be complicated. An adequate planning timeline helps the family come to consensus as a group. Communicate openly and frequently. Have a discussion about goals, objectives and what the family’s relationship to that business will look like. The owner should know he or she has people in place who are committed and have the desire to take on their roles.


Please see important information below.

Wealth Transfer