Hypothetical client example

You Own a Business

This hypothetical example is for illustrative purposes only. The names, circumstances, and outcomes are fictional and do not represent an actual client or actual results. Actual recommendations and results will vary, and no outcome is guaranteed.

Mike does, too. Mike’s story illustrates how a Family Office Director uses a holistic approach to solve Mike’s problems. Although Mike’s situation is unique, many of his concerns are common to business owners: a business that has outgrown its original structure, a retirement that depends on a successful exit, the crossover risk between health, longevity and the business itself. If you share those concerns, what follows may be enlightening for you.

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When Building a Business and Funding a Retirement Inevitably Converge

Mike started his metalworking business in his garage with a secondhand stamping press and a credit card. Eighteen years later, he has 20 employees and a business that generates several million dollars in annual revenue. The majority of his wealth is tied up in the company.

Mike has always poured profits back into the business and simply paid the taxes his accountant told him were due. His salary hasn’t changed in six years. Nobody has looked at the legal structure, the retirement plan, or who owns the building and equipment since the business had three employees, and none of it has changed.

Mike is 58 and wants to retire by 65. He expects to sell the company, but he has never had it appraised. His estimate comes from what he’s heard about the sale prices of similar shops.

Mike has a SEP IRA but no deferred compensation arrangement. His personal finances are otherwise simple: some savings, equity in his home, and a business he has always presumed would fund life in retirement. He has never run the numbers on retirement, on what a sale would net after taxes, or on how to help fund his grandchildren’s education.

Mike Needs a Plan That Unites His Business and Personal Life

Mike’s business and his personal finances are intimately connected. A Financial Gravity Family Office Director coordinates the subject matter experts needed to create a holistic plan.

Tax strategy should always be step one

Mike’s salary, retirement plan, and company structure were set when the shop was much smaller and have never been revisited. He doesn’t know whether changing any of them now could reduce his business or personal taxes, or affect the valuation and terms when the business is sold. These are hugely consequential issues for Mike.

As a business grows, the tax arrangements made at the start may need to change. Reviewing them before year-end gives the owner time to consider changes for that tax year.

A Family Office Director coordinates a review of Mike’s tax returns, compensation, retirement plan, and ownership of the building and equipment, examining which arrangements still fit the business today and which would benefit from a change.

Tax planning

Tax Blueprint® uses AI technology to identify and quantify one-time and recurring potential tax-reduction strategies for Mike and his business, along with the company structure and documentation needed to implement them.

HALO™ coordinates investments across his tax-deferred, tax-free, and taxable accounts to manage risk and account for how taxes affect investment growth.

Mike’s sale price, terms, and net payout are not defined

Mike expects the sale of his company to fund the majority of his retirement. At this point he does not know what a buyer would pay or how much he would keep after taxes, and he has no contingency plan if the sale is delayed by accident or illness or market conditions.

A retirement plan built on an expected sale date and price carries real exposure if either turns out differently. As of now, Mike’s future is dependent upon variables beyond his control.

The Family Office Director develops Mike’s retirement income plan using a range of sale dates and prices. The plan also includes Mike’s expected Social Security retirement benefits, equity in his home, long-term healthcare and longevity risks.

Retirement planningAsset management

Incomize™ models how different business sale dates and proceeds would affect Mike’s retirement income.

Control the Controllables® guides his personal investment plan by focusing on costs, tax efficiency, diversification, and a level of risk that accounts for his business ownership.

Mike’s key man risks are not insured

Mike has no disability coverage and no one designated to run the business if he cannot work. He has personally guaranteed the company’s line of credit, but his hoped-for retirement plan does not consider these critical risks.

Illness or disability may dramatically affect both the company’s revenue and Mike’s household’s income. Insurance, business debts, management responsibilities, and personal savings need to be reviewed together and solved holistically.

The Family Office Director coordinates disability coverage and a plan for who would run the shop if Mike could not work. The review considers the business’s expenses, his household’s income needs, and his obligations under the personal guarantee.

A comprehensive insurance review that includes tax planning, risk management, asset management, financial planning, and estate planning will identify and seek to create solutions to mitigate business and personal risks.

Risk management

Real Risk Meter™ establishes how much of a market decline Mike could actually tolerate, accounting for the financial exposure he already carries as a business owner. That number sets the risk level in his investment and retirement accounts.

Mike’s will is already out of date

Mike’s will dates from before he hired employees and leaves everything to his wife. He has no succession agreement and no one designated to run the company if he cannot. He has not planned how a sale or transfer would affect his wife’s finances or the money he hopes to set aside for his grandchildren’s education.

What Mike can spend in retirement and leave to his family is largely dependent upon the way his transaction is structured. The business transition and an estate plan need to reflect the same intentions and be organized accordingly.

The Family Office Director coordinates succession and sale planning with the specialists responsible for Mike’s taxes and estate documents. They review his will, succession agreement, and exit plan together, including provisions for his wife and his grandchildren’s education.

Legacy planningTax planning

Four Steps to Build a Lasting Plan for Mike

The Family Office Director starts with a comprehensive review of Mike’s business and household finances and desired outcomes, coordinates the work across specialists, and reviews the plan periodically as circumstances change.

01
Start with the whole picture

Review Mike’s tax returns and business and personal finances, determine when he wants to retire, and use Tax Blueprint® to identify potential tax savings strategies.

02
Build a coordinated plan

Develop a plan that connects Mike’s tax decisions, retirement income needs, and business succession arrangements.

03
Coordinate the work

Coordinate the specialists responsible for Mike’s company structure, compensation, investments, and business transition so their decisions support the same plan. Implement the appropriate insurance, compensation and estate solutions.

04
Keep the plan current

Review the plan annually and update it when changes in Mike’s business, family, or retirement plans require it.

Your first conversation covers the same ground for your situation: what you have, what you want it to do for you, and where disconnects and risks exist. There is no charge and no obligation.

Schedule a Call

If you would rather talk first, please schedule a call. Family Office Directors are located across the country, and also meet remotely. A discovery conversation is complimentary.

Mike’s Family Office Advantage™

Mike’s story is one of entrepreneurial determination and hard-won success. It’s also a common situation: for most business owners, the business and the personal financial life stay compartmentalized, right up until retirement and legacy force the question of how they need to fit together.

Now that Mike has a Family Office Director, his business and personal financial life don’t stay separate. His compensation, his company structure, and his retirement plan get reviewed together, every year, so no decision on the business, or on his own finances, gets made in isolation.

His plan compares different sale dates and different sale prices side by side, with a trusts and estates strategy built in to minimize what he owes at the transaction and after it. His business risks and his personal risks are weighed as one question, not two. His will, his succession agreement, his insurance, and his exit plan all point at the same outcome: the legacy Mike wants for his wife and grandchildren.

Start With What Matters Most

Most business owners eventually realize that the business they worked so hard to build will become the foundation of a life in retirement and a legacy for what comes after.

Preparing for the profound changes that come with retirement starts with your values and your goals. What could a sale or a transfer actually provide? How can you mitigate, transfer or eliminate the risks that threaten your desired outcomes? How do you keep from cutting the biggest check of your life, and retain maximum value from the business you’ve built?

Note what it does not start with: a product pitch, a speculation about the market, a performance track record. Those things all come and go. There’s a reason virtually every billionaire worldwide employs the Family Office model, and now it’s available to you, too.

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Other client profiles
You Hold Assets in More Than One Place
Accounts opened over the years, at different institutions and for different reasons, rarely add up to a coordinated plan.
I’m Worried About My Retirement Security
Retirement is less a finish line than a starting line, with real threats that need to be identified and managed.
You Want What You Have Built to Last, Intact, Beyond You
What you have built becomes a legacy when it passes, intact, to the people and causes that matter most to you.

Request a Taxes First, Then Math™ Analysis

Taxes can materially reduce investment gains over time, but often don’t get the attention they should. The right investment program starts with tax considerations. Wise investors also carefully consider all the costs of managing their money, and they use diversification to solve for a wide range of risks that go far outside the ones in their portfolio.

On top of all that, many investors simply do not know what their maximum downside loss exposure is. Do you? Can you say just how risky your portfolio really is?

It costs nothing to find out if your portfolio is right for you. Get your Taxes First, Then Math™ Analysis with no obligation. After all, a quality second opinion never hurt anyone.

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