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Wealth Plans Checklist Series: Pre- And Post-Transaction Plan

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Purpose

When you have an anticipated liquidity event that will have an enormous impact on you and your family’s life, planning considerations for pre- and post-transaction should generally include a review and understanding of your potential liquidity and cash flow, income tax liability, estate plan, investments and new income sources so that you can put timely strategies in place to minimize taxes, update any existing structures to conform with your gifting intent to your children, and emotionally and financially prepare yourself for the change.

Transactions such as selling the family business (or other similar event creating substantial liquidity from an otherwise illiquid asset) shifts your life in a completely different direction because you’re going from one form of wealth to another, inevitably raising questions of ownership, management, and philosophy on wealth inheritance through a new lens.  For example, ownership of family business stock almost always brings up issues of fairness and of control among family members who actively work in the business and those who don’t.  On the other hand, when the majority of family assets is a portfolio of securities likely to be managed with the advice of wealth professionals, inheritance of equal ownership by next generation family members seems reasonably fair.  Still, there will be different short and long term needs and goals for each family member; therefore, outstanding questions remain such as how the assets should be invested, whether and how much distributions may be expected to meet lifestyle expenses, do family members want to stay together or go their separate ways, and who will be given decision making authority.  What’s more, if your own personal identity is intricately tied to your business finding a new life purpose post-sale can bring a lot of mixed emotions.  Navigating this landscape of uncertainty takes time and the earlier you plan for post-sale life the sooner you’ll be able to enjoy the fruits of your hard labor.


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