No. of Recommendations: 1
Beyond that, I would love some help with anyone who has had success with transferring ownership of family owned businesses.

You want to attend to that sooner rather than later, and there are several issues to deal with.

A) First and foremost, there's no cookie cutter format. You need at least one trusted advisor, preferably one who's willing to work with a couple of other people with expertise in areas he/she is not strong in, to work out a structure that fits everyone well.

Second, the family members have to figure out what they would like to have happen, and then work from there to develop the structure that gets them closest to that result. Don't just ask "what's the best way to deal with this", because the answer is "it depends".

B) As for the business: is there a buy-sell agreement in place currently? If so, has it been revisited recently? Has the business been increasing in value significantly over time?

Most of the time (but not always) it is desirable to have a buy-sell agreement in place and check it periodically to be sure it still fits your needs. A buy-sell agreement is simply an agreement among the owners to purchase the ownership interest of one of the owners in the event of death or disability (or possibly even retirement/desire to leave the business). They can be structured with the company buying the interest, or the owners buying it pro rata. They can be funded in various ways (usually they are funded with some sort of permanent insurance in whole or in part, but not always).

Again, a good advisor should know at least the basics of buy-sells and determining if one is called for, and they should know or work with someone who understands the tax implications.

C) as for the owners, including you and your husband: do they (and you) have any estate planning in place? Will they have potential estate tax liability if they die and leave their share of the interest to their heirs? Federal estate tax liability begins, generally, at over 1.5 million in net worth, although this can be increased to 3 million for a married couple with a relatively simple bit of drafting in the will and use of a "credit shelter" trust (essentially, everyone get a 1.5 million exemption in general and an unlimited exemption for amounts passed to their spouse. By using a "credit shleter" trust, you can use your full 1.5 million exemption and pass any amounts above that on to your spouse). There are lots of other things you may want to do depending on your goals and desired end result.

That's starting to get too detailed, and I'm really just covering the basics here: you can read some other boards at TMF for some more details, but really you need to talk to an attorney/advisor who understands these issues to see what you should do. And do it sooner rather than later: in general, planning is cheaper and easier to do earlier, when everyone is in good health. And of course, you never know when someone could have a tragic gardening accident, and without any planning in place it could cause serious problems for the business. Remember, failing to plan is planning to fail; you don't want to discover the bad side of failing to plan. And estate planning is about the rest of your life, not just about what happens when you pass on.


(who, not so coincidentally, just finished writing a short article on Buy-Sell agreements for a newsletter at our office. Yes, you can guess what I do for a living)
Print the post  


Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.