The Center for Free Enterprise (CFE)
Our purpose is to provide a social network and platform for business people, concerning middle market mergers and acquisitions, business formation, business growth, and free enterprise generally.
Business Growth: Cutting Edge Estate and Tax Planning for 2016
How to maximize the value of one's estate or proceeds from the sale of an investment or business.
Summary Notes of Panel
March 18, 2016
- Tim Malloy, SVP Estate and Charitable Planning Specialist - Key Private Bank: Tim has over 30 years of professional experience, with the last 20 years at Key where he specializes in estate and charitable planning for high net worth clients. He is the Director and Founder of the St. Bernadette School Endowment Fund and Director Emeritus of the Victim Assistance Program for Summit County. Tim is a Golden Domer and has a JD from the Georgetown University Law Center.
- Craig Welch, CFP, CLU, VP - Key Private Bank: Craig advises high net worth Clients on Estate and Tax planning issues. He is active in the Akron community with the Akron Torchbearers and is Vice Chair of the University of Akron Department of Finance Advisory Board. He is an Akron Zip.
- Ken Sable, JD, MBA - Bober, Markey, Fedorovich: Ken is a senior manager in the individual and trust tax department and brings more than 15 years of experience serving high net worth individuals and owners of privately held businesses. He is Hiram College Terrier and holds a JD from CSU.
- David Brown is a Founder of the Center for Free Enterprise and is Managing Director of Red Hawk Associates and provides advice on the acquisition, sale and restructuring of middle market businesses.
A boisterous and well-fed (breakfast provided by Key Private Bank) audience heard Tim, Craig and Ken discuss strategies and techniques to maximize the value of one's estate or proceeds from the sale of an investment or business. The attendees volunteered numerous questions and comments and that interaction helped to make the discussion livelier than one might expect given the anticipated dryness of the topic.
The moderator guided the panel through a couple of case studies with a variety of twists and turns and prompted them to react and provide advice and perspective as they do with their Clients. Two major themes emerged from the discussion. The first, emphasized by Tim Malloy and Ken Sable, is that advance planning for the sale of a business, for retirement or for the preservation of one's estate is critical. Craig noted that only 8% of business owners have an exit plan. No news flash there but Tim and Craig both mentioned several pros and cons of estate and tax planning that seemed to surprise many in the audience. One example was converting from a C to an S Corporation structure if possible to avoid taxation at the corporate level. In a practical sense, the sale of a C Corp would require a higher valuation to provide its shareholders the same after-tax proceeds as the sale of the same business with an S Corp structure.
The panelists advised the audience that a planning best practice is to include both spouses and other key family members in the process from the beginning. Poor communication is a frequent culprit in blown deals or plans.
Ken reported on a recent study that indicated that 93% of business owners have most of their wealth invested in the business. He suggested 3 action steps to take after one has committed to developing a plan 1) work on diversify one's investment portfolio, 2) get contracts (buy-sell, employment, leases, etc.) up to date and 3) obtain a business valuation and recommendations from an investment banker on how to increase the business' value and to prepare it for an eventual sale.
The second theme related to not focusing too much on tax minimization as a strategy. Tim said to look at all the estate's current and future assets. He and Craig both said to include the intangible assets as well, such as one's value system and educational funding. The latter interest can drive the creation of educational trusts or similar vehicles.
In summary, the Panelists did a terrific job in less than one hour covering a multitude of important topics on tax and estate planning. You can contact them as listed above. Please make a note that the next CFE event is at 730a on May 20, 2016 at the Cleveland Racquet Club.