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Case Studies

married couple approaching retirement

Dennis & Susie,  the Business Owners


65 & 62

Primary Goals

Pass on their family business to their sons, ensure that their children are treated fairly in the estate plan, have a strategy for paying estate taxes.

The Problem/Challenge

Dennis and Susie Stockwell have two great passions in life: their 4 children and their family business. Dennis had grown the plastics manufacturing company he inherited from his father into a national distributor. It had expanded precipitously under Dennis’ management and he was now looking forward to passing it on to his two sons, Tim and Jeff.

Tim, having worked in the family business starting right out of high school, was set to have a majority share in the business, while Jeff who had worked elsewhere before coming back to the family business would still receive an ownership stake but would be a minority owner to his brother Tim.

Susie’s biggest concern was how she and Dennis could be “fair” to their two daughters Robin and Julie, when it came to distributing their estate. Like most parents she imagined that fair meant equal, but Dennis knew from his conversations with Robin and Julie that his daughters had no interest in being a part of the family business. Consequently, Dennis and Susie had to come to a solution of how to make things fair within their estate plan.

Finally, both Dennis and Susie were worried about the estate taxes that would come due at their passing under their current plan. Susie didn’t like the implications that had for their children because it would add an unnecessary headache to the entire situation and Dennis was concerned that Tim and Jeff would have to sell part or all of the business just to pay the estate taxes. This is where we began our conversations with Dennis and Susie.

The Solution/Approach

To begin, we took the first meeting to thoroughly understand both Dennis and Susie’s concerns. To reconcile Susie’s goal of being fair to all their children and respect Dennis’ wish to have his two sons inherit the family business, we had to reframe the idea that fair might not necessarily mean equal in this case. Once Susie and Dennis were in agreement we were able to begin tackling their main concerns.

To address Dennis’ concern about how to pass on the business to Tim and Jeff we presented the idea that Dennis begin gradually gifting shares of the company to Tim and Jeff in an effort to shift the asset off of his balance sheet from an estate tax perspective. This allowed Dennis to create a smooth transition from himself to Tim and Jeff as well.

As mentioned earlier, Susie was very concerned with how the other two daughters would be treated in their estate plan. To address this, we referred her to an estate planning attorney who was able to help them change the beneficiary designation and liquidation strategies for their non-business assets. This helped equal out some of the disparity between the sons’ and the two daughters’ shares of their parent’s estate.

Finally, to address the concern around how their children would afford paying the estate tax, we helped Dennis and Susie set up an Irrevocable Life Insurance Trust utilizing the expertise of the estate planning attorney. We then put in place a large enough permanent insurance policy to cover any estate tax liability that would be generated when their estate passed to their children.

The Reward/Results

Once Dennis and Susie had implemented those strategies they felt a sense of relief and confidence knowing that they had a plan in place to pass on their legacy to their children in a fair manner. They told us that we had been able to facilitate conversations they had been meaning to have and knew were important but had never gotten around to.

Susie was glad to know that their new plan would provide their children with a smooth transition after her and Dennis were gone. Dennis felt relief knowing that his sons would be able to carry on the family business and grow just as he had done for his father.

Lastly, all 4 of their children were glad to know that there was a plan in place to pay the estate tax bill with something other than their parents’ estate, so that they wouldn’t be forced to sell assets that they may have family memories with such as the house or the family business. Overall, Dennis and Susie appreciated having a plan in place for the inevitabilities that had remained unforeseen or unresolved.

Securities and investment advisory services offered through Royal Alliance Associates, Inc. member FINRA/SIPC. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products or services referenced here are independent of Royal Alliance Associates, Inc. 28411 Northwestern Highway, Suite 1300, Southfield, MI 48034. (248) 663-4700. 23078108-20210503

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