High-profile cases like the Bezos or the Gates should cause many people to consider how their business and marital assets are tied together. You need to have plans in place from the beginning. No one thinks their partnership will end. However, it’s necessary to have a plan in place, just in case.

The Dallas Business Journal’s recent article entitled “Does your business need a prenup?” explains that there are three typical outcomes when married couples working as business partners decide to end their relationship:

• One individual buys out the other partner’s shares and continues running the business;
• The partners sell the business and divide the proceeds; or
• The couple continues working as partners after the divorce.

Safeguards can be put in place on the first day of the relationship to protect your personal and business assets in the event of a divorce. A way to do this is through a prenuptial agreement, which states what will happen if a split happens. A pre-nup should:

• Establish the value of the business as of the date of marriage or the date the agreement is signed;
• Detail a course of action with the appreciation or depreciation of the business from the date of the marriage;
• Say how business value will be measured; and
• Specify the allocation of business interests to be awarded to each spouse in the event of a divorce.

In addition to a prenuptial agreement, any privately held company should have a shareholder agreement (or “operating agreement” for non-corporations). The shareholder agreement is one of the most important documents owners of a closely held business will ever sign, but unfortunately, many businesses don’t have it.  It can also help to protect assets against judgment creditors and predators.

It controls the transfer of ownership when certain events occur, like divorce and states the following:

• Which party will buy out the other’s shares of the company if a buyout occurs; or
• If either party has the right to sell, how the ownership interest will be valued and the terms and conditions concerning the acquisition.

Because there are some tax implications involved in a buyout, it’s best to bring in experienced estate planning attorney who understands federal income tax law (and possibly federal estate tax law) for this process. In addition, life events like divorce or changes in a business partnership are an appropriate time to update your will, estate plans and any necessary insurance policies.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Happens If Couple Divorce and Own Business?” read also these additional articles: Can Some Foods Help Prevent Alzheimer’s? and Wayward Senior Tracked by Bluetooth Technology and What is the First Sign of Dementia? and Who Is the Best Person for Executor?

Reference: Dallas Business Journal (Aug. 1, 2022) “Does your business need a prenup?”

There are countless horror stories about grandchildren in tears, as they watch family farmland auctioned off because their grandparents had to liquidate assets to satisfy the taxes.

Another tale is siblings who were once in business together and now don’t talk to each other after one felt slighted because they didn’t receive the family’s antique tractor.

Ag Web’s recent article entitled “Who Gets What? Take This Important Estate Planning Step” says that no matter where you are in the process, you can always take another step.

First, decide what you’re going to do with your assets. Each farmer operating today needs to be considering what happens, if he or she passes away tonight. Think about what would happen to your spouse or your children, and who will manage the operation.

The asset part is important because you can assign heirs to each or a plan to sell them. From a management perspective, farmers should then reflect on the wishes of your potential heirs.

Children who grew up on the farm will no longer have an interest in it. That’s because they’re successful in business in the city or they just don’t have an interest or the management ability to continue the operation.

Second, assets if your estate will owe federal estate taxes.  Right now, the federal estate tax exemption sits at $12.06 million per person.  That means a couple can bequeath or give $24.12 million without estate tax consequences.  However, on January 1, 2026, in just under 3.5 years, the federal estate tax exemption reverts to one-half of the amount today, that is $6.03 million (in 2022 dollars) per person or $12.06 million (inb 2022 dollars) for a couple.  The IRS has already provided guidance that any gifts to heirs made today will not be “clawed back” under any reduction of the exemption.  What is more, if you make a gift today, that gift removes future appreciation from the taxable amount.  This gifting strategy can be combined with other estate tax planning tools such as estate freeze techniques, discounting techniques, and can be dovetailed with other non-tax goals.

After a farmer takes an honest assessment, he or she can look at several options, such as renting out the farmland or enlisting the service of a farmland management company.  After all, your rental income from your land won’t be worth as much if your heirs have to sell much of it to pay for estate taxes!you have to sell

Just remember to work out that first decision: What happens to the farm if I’m dead?

Once you work with an experienced estate planning attorney to create this basic framework, make a habit of reviewing it regularly.

You should, at a minimum, review the plan every two to three years and make changes based on tax or circumstance changes.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What’s the Most Important Step in Farm Succession?” read also these additional articles: Is ABLE Account the Same as Special Needs Trust? and Pay Attention to Income Tax when Creating Estate Plans and How Changes to Portability of the Estate Tax Exemption May Impact You and What Healthy Snack Is Best for My Long-Term Health?

Reference: Ag Web (August 1, 2022) “Who Gets What? Take This Important Estate Planning Step”

Business owner’s heads are frequently filled with a steady stream of questions concerning day-to-day activities. Long-range planning questions about how to expand the business, set business priorities, identify vulnerabilities, etc., are lost in the flood of events requiring immediate action. However, business owners need to keep both details and the big picture in mind, according to a recent article “5 Ways Business Owners Can Use Trusts to Benefit Their Company” from Entrepreneur.

Three key questions for any business owner are: how can I minimize taxes, protect assets and what kind of legacy do I want to leave with my business? All three questions can be answered with two words: estate planning. Within estate planning, trusts are a well-known tool to tackle and solve these three issues.

A trust is a legal entity created when one party (the settlor) gives another party (trustee) the right to hold title to property or assets for the benefit of a third party (beneficiaries). Trusts are used to provide protection for assets for individuals and businesses. For business owners, trusts protect beneficiaries and thwart potential creditors (including previous spouses) from gaining direct access to assets held within the trust.

If set up properly, all future growth of assets transferred to an irrevocable trust occurs outside of the estate. It will apply to your lifetime exemption, but all future growth occurs estate tax free. Let’s say a business owner transfers a business worth $3 million into an irrevocable trust and years later, the company is sold for $17 million. The increased value is not subject to estate taxes, saving family members a significant amount of money.  But the potential loss of the “step up” in income tax basis should always be considered in estate tax planning.

It should be noted these types of trusts needs to be created with an experienced tax and estate planning attorney to achieve the desired goals.

Assets in a trust maintain privacy. For companies and individuals who live in the public eye, placing assets in trust means only the settlor and trustee need to know about the assets. A person who lives in a small city and owns a few restaurants may not want their personal financial matters to become known when they die. Wills become public documents when the estate is probated; trusts remain private.

Litigation arising from sales of small businesses are among the most common legal actions filed against business owners. By removing assets from ownership, the business owner receives another layer of protection. You can’t be sued for assets you don’t own.

Trusts are used in succession planning and should be created to align with business legacy objectives, whether the plan is to sell the company to outsiders, key employees or keep it in the family. Succession plans must be properly documented. This is done with the estate planning attorney, CPA and financial advisor working in tandem. A succession plan should also address the goals for the business owner’s life after the business is sold or transferred. Do they want to remain on the board of directors, do they require income from the business to maintain their costs of living?

Minimizing taxes. Preparing for a liquidity event is an excellent reason to consider creating a trust. Depending upon its structure and the laws of the estate, a business owned by a trust may minimize or avoid state income taxes on a substantial portion of the estate income tax.  With an a non-grantor irrevocable trust, however, the compressed income tax brackets should be taken into account in your income tax planning.

A succession plan, like an estate plan, needs to be created long before it is needed. Ideally, to answer the question “What are the Advantages of a Business Trust?”, a succession plan should be created as soon as possible after a business is established (or even before) and revised as time goes on. When the company attains certain milestones, the plan should be updated.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What are the Advantages of a Business Trust?” read also these additional articles: What Is the Best Asset Protection? and What Happens If My Partner Dies and We’re Not Married? and What Does a Blended Family Need to Know about Finances? and Shocking! 8 Things That Can Spark a Will Contest

Reference: Entrepreneur (June 17, 2022) “5 Ways Business Owners Can Use Trusts to Benefit Their Company”

With so many law firms, it can be challenging to find the right one for your estate planning, says Diving Daily’s recent article entitled “5 Factors to Consider When Choosing an Estate Planning Law Firm.”

The article lists the following factors you should consider when choosing an estate planning law firm.

1. Your Specific Needs. Before you look for an estate planning lawyer, first determine what it is you need from the lawyer. Consider the intricacies of your estate and whether it has any complexities and special considerations. This will help you narrow down the list of legal professionals who can help you plan your estate.
2. Experience. Working with an inexperienced law firm or attorney will only work to your detriment. You typically want to look for a lawyer with at least five years of experience in estate planning.
3. Fees. The expense shouldn’t be your primary consideration when selecting an estate planning attorney, but it’s still worth mentioning. Make certain that you find an attorney that you can afford. However, this doesn’t mean you should hire the cheapest lawyer you can find. In most cases, you’ll end up getting what you pay for. Instead, find a lawyer with reasonable rates.
4. Reputation. You want an estate planning attorney who has made a name for his or herself in estate planning law. Look at reviews and testimonials online. These are first-hand accounts of previous clients’ experiences with the law firm. They’ll help you decide whether the lawyer is worth your time and money.
5. Attitude. Make an in-person appointment with the attorney before making your decision and learn about the lawyer’s attitude and demeanor. You’ll want an attorney that’s friendly and easy to talk to. You should note his or her professionalism and knowledge of estate planning.

I would add the following to that list:

• Board Certification in Estate Planning.  The Louisiana Bar Association certifies a select group of attorneys as specialists in estate planning.  For these attorneys, look for description as “Board Certified Estate Planning and Administration Specialist”.  In addition to the bar exam that applies to all attorneys, these specialists are required to pass an estate planning specialization examination, have at least 5 years of experience in estate planning (with at least 30% of their practice in the estate planning area), and are subject to more rigorous continuing education standards than other attorneys.  The list of those Louisiana attorneys can be found here:  https://www.lsba.org/specialization/Specialist.aspx?Spec=Estate.
• Tax Competency.  Many people who look for an estate planning attorney should also have an attorney competent in tax law, including federal estate and gift transfer taxes, as well as federal and state income taxes.  If you are concerned about taxes and obtaining the best overall tax result, then an attorney knowledgeable about taxes is a must.  For these attorneys, look for one that is also a CPA, or any attorney that is a “Board Certified Tax Law Specialist”.  The list of those Louisiana attorneys can be found here: https://www.lsba.org/Specialization/TaxLaw.aspx?Area=Specialists
• Business Law Competency.  If you are a small business owner, or have significant holdings of real estate, your attorney should also be competent in both business planning and asset protection.  Many of the attorneys who are Board Certified Tax Law Specialists also are competent in business law and asset protection.

Make sure you do your due diligence to find the best people to help you plan your estate.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “How to Find a Great Estate Planning Attorney” read also these additional articles: What Happens Financially when a Spouse Dies? and What the Latest Dementia Study Says about Links with Certain Medicines and What Fruit Is Best for My Heart? and How to Get Into a Nursing Home as a Medicaid Recipient

Reference: Diving Daily (April 26, 2022) “5 Factors to Consider When Choosing an Estate Planning Law Firm”

Family LLCs are used to protect assets, reduce estate taxes and more efficiently shift income to family members, reports the article “Handling Estates Like An LLC Can Reduce Taxes” from Financial Advisor. The qualified business income and pass-through entity tax deductions may add significant benefits to the family.

What is a Family LLC? They are holding companies owned by two or more individuals, with two classes of owners: general partners (typically the parents) and limited partners (heirs). Contributed assets of the general partners are no longer considered part of their estate, and future appreciation on the assets are not counted as part of their taxable estate.

Consider the LLC as three separate pieces: control, equity and cash flow. Because of the separation, you can maintain control of the personal/business assets, while at the same time transferring non-controlling equity of the assets to someone else via a gift, a sale, or a combination of the two.

An added benefit—transfers of non-controlling equity can qualify for a discount on the value for tax reporting, minimizing any gift or estate tax consequences of the transfer. Discounting business entities with very liquid assets is generally not advisable. However, illiquid assets could warrant a discount as high as 40%.

For example, if your estate is worth $15 million, $3 million of your estate would be subject to the estate tax (because the federal exemption is $12 million), resulting in an estate tax of up to $1,200,000 ($3 million X 40% federal estate tax).  If your property was in a family limited liability company, your estate could get a discount of up to 40% of the value of your estate.  In this case, if your $15 million estate was discounted 40%, down to $9,000,000 ($15,000,000 estate X (1 – 40% Estate Tax Rate), you would have no estate tax.

These types of structures are complicated. Therefore, you’ll need an estate planning attorney with federal tax experience.   Particularly, the attorney needs to know how Family LLCs interact and the federal estate tax law works with estate planning. The LLC must be properly structured and have a legitimate business purpose.

An ancillary benefit to a family LLC is that they can be used as a vehicle to protect your family’s assets (an asset protection purpose), and in addition, they can be used as a vehicle to pass family assets intact to the next generation (an estate and wealth preservation purpose).

It’s important to note that if a real estate or operating business is put into an LLC and taxed as a pass-through entity instead of a sole proprietorship, they may be eligible for the 20% discount under Section 199A, or for the pass—through entity tax workaround for the limitation of the deductibility of state taxes for individuals and trusts.

Every state has its own rules about income qualifying for a state income tax deduction on the federal level. If you have an entity in place, you’ll want to speak with your attorney to determine if a pass-through entity on the state level will be advantageous. If so, this election may allow for a state income tax deduction on the federal level.

Your estate planning attorney will help you get a qualified appraisal of the assets, since the IRS will require an accurate value of the transfer for reporting purposes, especially if a discount is being contemplated. This is a complex matter, but the estate planning and tax advantages to be gained make it worthwhile for families with a certain level of assets to protect.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Can a Family Limited Liability Company Reduce Estate Taxes?” read also these additional articles: Should I have a Pour-Over Will? and How Do I Find a Great Elder Law Attorney? and What Is Cause of Death in Half of Seniors? and Which Supplements Don’t Go Well with Meds?

Reference: Financial Advisor (April 4, 2022) “Handling Estates Like An LLC Can Reduce Taxes”

Failing to have a succession plan is often the reason family businesses do not survive across the generations. Creating, designing and implementing a succession plan can protect the family’s legacy, according to the article “Planning for Success: How to Create a Suggestion Plan” from Westchester & Fairfield County Business Journals.

If you do not have a business succession plan, and you are the sole owner, your business could become worthless upon your death, resulting in your heirs getting nothing from the business.  Alternatively, if you are in a partnership or co-ownership with another business owner, your partner could continue operating the business, but your heirs could be locked out of distributions of profits from the business and locked out of decisionmaking.  Almost always, a proper business succession plan should be put into place.

Start by establishing a vision for the future of the business and the family. What are the goals for the founder’s retirement? Will the business need to be sold to fund their retirement? One of the big questions concerns cash flow—do the founders need the business to operate to provide ongoing financial support?

Next, lay the groundwork regarding next generation management and the personal and professional goals of the various family members.

Several options for a successful exit so that your business will not die when you die plan include:

• Family succession—Transferring the business to family members
• Internal succession—Selling or transferring the business to one or more key employees or co-workers or selling the company to employees using an Employee Stock Ownership Plan (ESOP)
• External succession—Selling the business to an outside third party, engaging in an Initial Public Offering (IPO), a strategic merger or investment by an outside party.

Once a succession exit path is selected, the family needs to identify successors and identify active and non-active roles and responsibilities for family members. Decisions need to be made about how to manage the company going forward.

The options listed can be financed in one or a few of these ways: (1) outright payment of cash; (2) the purchase of a life insurance policy on key members or owners; (3) through a seller-financed arrangement (whereby the buyer makes payments over time with the seller securing the business and the assets of the business, much in the way a bank will secure the purchase of a home); and (4) a bank or SBA financed arrangment (whereby the seller gets cash at closing and the buyer pays the bank/SBA over time).  Any agreement that you have with a partner should be set forth in a binding “Buy-Sell Agreement”, which can be a stand alone agreement amongst the partners, or a buy-sell provision in your company Operating Agreement.

Tax planning should be a part of the succession plan, which needs to be aligned with the founding member’s estate plan. How the business is structured and how it is to be transferred could either save the family from an onerous tax burden or generate a tax liability so large, as to shut the company down.  The sale could be structured as an “asset sale” whereby each individual asset of the business is purchased in total, or an “entity sale” whereby the entity itself (for example, the LLC or corporation) is sold.  If  your company is categorized as a “c corporation” or an “s corporation” for tax purposes, the sale can be structured as an “entity sale” for state law purposes, but there is still the option of categorizing the sale as an asset sale for tax purposes under Section 338 of the Internal Revenue Code.  The bottom line is that you don’t want to create any extra taxes due to the sale, including “depreciation recapture”, and you should know your after tax rate of return (including how much of the sales price will be categorized as  “return of capital”, “capital gains” and “ordinary income”).  The installment sales method may be a good way of delaying recognition of the gains from the sale over time and avoiding taxes due to tax bracket jump.

Many owners are busy with the day-to-day operations of the business and neglect to do any succession planning. Alternatively, a hastily created plan skipping goal setting or ignoring professional advice occurs. The results are bad either way: losing control over a business, having to sell the business for less than its true value or being subject to excessive taxes.

Every privately held, family-owned business should have a plan in place to establish what will happen if the owners die or become incapacitated.

An estate planning attorney who has experience working with business owners will be able to guide the creation of a succession plan and ensure that it works to complement the owner’s estate plan. With the right guidance, the business owner can work with their team of professional advisors to ensure that the business continues over the generations.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Will Your Business Die When You Die?” read also these additional articles: Medicare’s Coverage of New Controversial and Expensive Alzheimer’s Drug Is Limited and What Estate Planning Documents are Used to Plan for Incapacity? and Special Needs Planning and What Needs to Be Reviewed in Estate Plan? an

Reference: Westchester & Fairfield County Business Journals (March 31, 2022) “Planning for Success: How to Create a Suggestion Plan”

If you fail to take the necessary measures, you can lose your property, which might cause financial challenges when you will not be working in retirement.

Legal Reader’s recent article entitled “How to Legally Protect Your Assets” says there are different strategies you can use to protect your personal assets.

This will help you to prepare for any eventuality. Let’s look at some of them:

A Family Trust. This may be one of the best strategies to protect your personal assets. A trust will help protect your assets when you lose all your money. A family trust can also provide tax benefits to family members in lower tax brackets. However, talk to an experienced estate planning attorney before setting up the trust to make the right decisions.

Start a Company. This may be an alternative to setting up a family trust, since your property will be more secure than when operating a sole proprietorship or a partnership business. This gives you a more secure future, even when you face financial challenges. However, there are many legalities in starting a company, so talk to an attorney.

Register Your Most Valuable Assets in the Name of the Low-risk Spouse. This tactic will make it difficult for a trustee or liquidator to gain access to the property in case of bankruptcy. However, ask an attorney to help you to structure the purchase to make certain that the low-risk partner’s name appears on the legal documents. An experienced estate planning attorney can also help you access benefits, such as Social Security and Medicaid.

These laws keep changing. You might miss an opportunity of getting long-term care planning, if you keep postponing a review with an experienced estate planning attorney.

As you spend your hard-earned cash, take some time to learn how to protect what you buy.  You should also use the legal strategies above to keep your property secure.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “How to Protect Valuable Assets in Estate Planning” read these additional articles: Social Security Retirement Age Changing and What Does that Mean to Payment? and How to File Tax Return When Mom Passes Away and What’s a Medicaid Annuity? and Should I Delay Claiming Social Security?

Reference: Legal Reader Jan. 26, 2022) “How to Legally Protect Your Assets”

For many business owners, between 70% and 80% of their wealth is tied up in their business. Research also shows that just 20% to 30% of businesses that go to market actually sell. That leaves 80% of business owners with limited options to monetize the value of their business and wealth for future financial security.

The Tampa Bay Business Journal’s recent article entitled “Selling a family business: Plan to maximize value and preserve wealth” explains that there are several factors facing Boomer business owners, as they consider selling their businesses:

• They may be worried about forfeiting their income stream.
• They may feel trapped because the business funds a certain lifestyle.
• They could be worried about what they’ll do in the next chapter of life after leaving.
• They may not have a sense of urgency or plan for an unexpected life event, such as an illness or death; and
• They could be misinformed about options for a strategic exit to capitalize on the business’ value.

It’s critical to start business exit planning now.

It’s not uncommon that when businesses are passed on from one generation to the next, family conflicts can occur. With about three-quarters (70%) of family businesses failing after being passed to the next generation, there’s good reason to reconsider leaving your business to your children in the traditional sense.

More business owner children either can’t afford to buy the family business or would prefer to not be saddled with it. In fact, UBS Global Wealth Management found that 82% of the next generation would prefer the money from the sale of the business. Half of family business owners also don’t know their exit options and have no transition team or transition plan.

About half of all exits from a family business aren’t voluntary. The five Ds — death, disabilities, divorce, distress, and disagreements — can derail a sound business exit strategy. Instead of holding on too long and focusing on just income generation, business owners should look at growing the enterprise value of the business, thus making it more attractive and transferrable to new ownership.

Business owners should have secure contracts, an experienced management team and a sound succession plan to keep the business operating and demonstrate its market value.

You should aim to exit your business when it’s at peak enterprise value and while you have control to depart on your terms.

Keep two other things in mind.  First, a life insurance policy owned by the business owner might provide some liquidity if one of the heirs wants to inherit the business and the other heirs don’t.  The cash can allow the hier that wants the business to get the business, and the other heirs to get cash from the life insurance policy.  Second, keep in mind the tax implications of selling the business.  Often, it is a good idea to wait until death to get certain death benefits built into the tax code (yes, there are some benefits!) that you might not get if you simply give your children your business during life.  As a qualified tax planning attorney or CPA about how to structure your business for tax purposes.

Simply gifting a family business to the next generation may not be the right decision. Ask an experienced estate planning attorney about other options to consider.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about business planning, estate planning, incapacity planning, and asset protection.

If you liked this article, “How Should I Plan to Sell My Business?” read these additional articles: Do Charitable Trusts Help with Estate Planning? and What Power Does an Executor Have? and Can a Nasal Spray Prevent Dementia? and Should I Use a Corporate Trustee? and What a Will Can and Cannot Do and Does Louisiana Have an Inheritance Tax?

Reference: Tampa Bay Business Journal (Nov. 29, 2021) “Selling a family business: Plan to maximize value and preserve wealth”

Digital Music News’ recent article entitled “Why Did Bruce Springsteen Sell His Music Rights? A Breakdown of the Decision” looks at what could have prompted the Born to Run creator to cash in on his catalog.  Here are the likely reasons why ‘The Boss’ sold his music catalog:

Money. Cash is perhaps the leading contributor to the New Jersey-born Bruce Springsteen’s decision to sell his music intellectual property. Few would turn down a half-billion-dollar (or larger) paycheck – especially when the sum reportedly represents 30 times the annual royalty payments that the 20-time Grammy winner received.

There are a number of other artists, such as Stevie Nicks, Paul Simon and Bob Dylan, who have exchanged all or some of their song rights for massive compensation.

Estate Planning. This is another important consideration regarding Springsteen’s decision to sell his music rights. Cash, property and similar physical assets are much easier to pass on to heirs than a complex collection of music intellectual property, copyrights and licensing agreements. This may have been a part of the 72-year-old Springsteen’s decision to sell.

The estates of artists, such as James Brown, have been engaged in legal battles. In fact, Brown’s estate was in litigation for over 10 years, before finally settling over the summer.

Tax Planning. Finally, there are tax-planning advantages associated with the transaction’s timing. Right now, the federal capital gain tax rate is currently 20% (with a possible 3.8% addition under the Affordable Care Act). The White House has also proposed increasing that rate to 43.4% for those who earn more than $1 million.

Due to this potential change and other possible tax-rate hikes, as well as the fact that royalties are already taxed as “ordinary income,” at a comparatively substantial 37% federal rate, Bruce Springsteen’s deal looks to have brought with it several perks on the taxation side.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Why Did ‘The Boss’ Sell His Music Catalog?”, read these additional articles: How to Avoid a Family Fight over Company and Should I Get a Medical Alert System? and What If I Become a Sudden Caregiver for a Senior? and Do I Get Ex’s 401(k) because I Was Named the Beneficiary?

Reference: Digital Music News (Dec. 20, 2021) “Why Did Bruce Springsteen Sell His Music Rights? A Breakdown of the Decision”

A comprehensive succession plan is a set of legal guidelines to ensure an orderly transfer of financial control and executive responsibilities to a new generation of leaders. Index Fund Advisors’ recent article entitled “How to Avoid a Messy Succession Battle” suggests that you take a multi-prong approach to succession planning.

A business owner must identify the individual who has the skills to run a business. A succession plan can sometimes divide the leadership roles, with one person running the business and another in a senior role overseeing long-term development and planning.

Business owners also must consider their personal estate plans when devising a succession plan. Business owners need to be proactive about estate planning and succession planning. Ask an experienced estate planning attorney about both processes as ongoing strategies. That means you don’t create an estate plan or a succession plan and file it away until you want to retire. Circumstances can change, so you’ll probably periodically need to review it and make sure everything is up-to-date.

When multiple owners are involved, a succession plan should create rules and procedures for other owners who might want to hire friends and relatives for key positions. The company’s founders must consider what happens if an owner gets a divorce, suffers a disability, or declares personal bankruptcy. These types of situations can change the rules within a buy-sell agreement—the master document that details the rules between who gets what and how a company is organized in the future.

A succession plan can also state the rules for issues involving transferring of equity and/or shares of a company to family members. In addition to putting into writing exactly who can be a transferee and the amount of equity they’re allowed, business owners should use the succession planning process to address issues related to voting rights. A succession plan should also specify the financial terms at the time of an owner’s death or sudden exit.

You also want to make the right decisions from a tax perspective.  A random agreement established by you or an attorney that doesn’t understand the income tax implications of the agreement is a bad idea.  You want to make sure that both the buyer and seller achieve compatable goals tax wise.  These goals can often work at cross purposes from one another.  For example, the seller that wants to avoid a tax on ordinary income, and who would rather have income classified as captial gains, may be working with a buyer who wants his purchase deductible more quickly by allocating more of the purchase price to inventory (deductible as a cost against ordinary income).

While avoiding such a decision-making process might appeal to younger executives, delaying these decisions and processes creates more uncertainty in a company’s ongoing success.

Whatever the size of a business, any business owner needs to create a succession plan sooner rather than later. If you don’t, you may leave a mess for the next generation of owners and employees.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “How to Avoid a Family Fight over Company” read these additional articles: Can I Restructure Assets to Qualify for Medicaid? and How Do I Plan with a Special Needs Child? and How Do I Give My Children the Summer Home? and Any Ideas How to Pay for Long-Term Care?

Reference: Index Fund Advisors (Nov. 22, 2021) “How to Avoid a Messy Succession Battle”