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The Business Owner’s Guide to Wealth Preservation: Safeguarding Your Assets for Future Generations

by | May 10, 2023 | Business

Business owners work long and hard to build wealth and establish a successful enterprise. However, protecting and preserving that wealth for future generations can be complex and challenging. In this guide, we provide key strategies to safeguard your assets and ensure your legacy continues. 

Planning Your Estate

Estate planning is essential to managing and preserving your assets. Among the key components to consider is trust planning. Trust planning offers a number of benefits, including

  • Seeking to ensure wealth gets distributed according to your intentions
  • Managing estate tax exemptions
  • Striving to protect your heirs’ inheritance from a spouse, should their marriages end in divorce
  • Providing an independent trustee to help manage assets
  • Better positioning transfer tax on appreciating net-worth 

Use a Generation-Skipping Trust

For grandparents who envision a legacy that spans generations, a generation-skipping trust (GST) may be the ideal vehicle. Typically, any attempt to transfer estate assets directly to a generation other than your children would trigger a generation-skipping transfer tax (GSTT), which is separate from and in addition to an estate tax. A properly drafted GST can cleanly and directly facilitate the transfer of money to your grandchildren, effectively skipping over your children and reducing the estate tax burden on the money. 

Asset Preservation

Business owners who have acquired substantial personal assets face the possibility of having their assets targeted by creditors or claimants who want to resolve a personal or business liability. This is especially true in the case of a business owner who guarantees a debt of the business with his personal assets. Business owners should explore all legitimate strategies to protect their personal assets from business-related liability claims, including creating a limited liability company (LLC) or a trust to hold assets. Business owners should also consider purchasing a personal umbrella liability policy.  

Tax Planning

In many cases, the greatest impediment to building and preserving wealth is unnecessary taxes. Working with a tax professional who can help identify tax-saving opportunities to better position your profits and grow your wealth is critical. 

Growing and Preserving Your Assets 

For business owners, wealth is built through concentration in their business. But ultimately, it is preserved through diversification. To ensure your assets continue to grow and are preserved for future generations following the sale of your business, it is essential to have a well-diversified investment strategy based on your specific objectives and risk tolerance. While a diversified investment portfolio may never match the returns generated by your business, it serves the essential purpose of preserving your wealth and providing a backstop for your family’s security.

Business Succession Planning

Business succession planning involves creating a plan to transfer your business ownership and management to the next generation or a successor. The preferred option for many family businesses is to keep the business in the family. As the family and the business mature, it is vital to create definitive ownership transfer plans that include clear objectives, expectations, roles, responsibilities, and timetables. The plan must specify how the transfer of management, control, and, ultimately, ownership will occur. 

Post-Business-Sale Planning

For many business owners, their business is their primary asset and predictable income source. However, following the sale of your business, your balance sheet suddenly changes, requiring the careful management of objectives where income and risk are critical considerations. This can present a challenge to families as they attempt to navigate the changes to sustain a desired lifestyle and sustain their wealth across generations. 

To be prepared, a comprehensive plan should be developed before the sale of the business and include these elements: 

  • Clearly define your financial objectives using realistic values and growth assumptions based on risk factors
  • Design an investment and cash flow strategy to support the family’s lifestyle while providing a safety net 
  • Establish aspirational goals and generational intentions that can be achieved within the plan’s framework

Don’t Go It Alone

Such comprehensive planning typically requires the input and coordination of advisors from multiple disciplines. It takes extensive preparation – financially and emotionally – with a goal to ensure the successful transition of wealth so that it can be preserved and used in pursuing new ambitions. There is no more critical time to have a team of trusted advisors with deep experience working with business owners to safeguard your assets and ensure your legacy continues for future generations. 

*The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.. Trivium Point Advisory and LPL Financial are separate entities. Tax and accounting related services offered through Trivium Point Advisory LLC, DBA Trivium Point Advisory, LLC. Trivium Point Advisory is a separate legal entity and not affiliated with LPL Financial. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for individualized tax or legal advice. Please consult your legal advisor regarding your specific situation. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

LPL Financial does not offer tax or legal advice or services

The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

This article was prepared by Lexicon Advisor Marketing. This article was prepared for Trivium Point Advisory’s use.

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