Surviving the Great Recession wasn’t easy for anyone, but it had a unique impact on business owners who were looking forward to retirement. One-third of small biz owners are over the age of 55 – primed to step away from the day-to-day routine. When the economy went into a tailspin, those trying to either sell or otherwise transition the ownership of their business had to keep working, even as the long slump made staying in business a struggle. 

Navigating the weak economy was a challenge for all business owners. As conditions improved, those who survived the economic crisis had to push back anticipated business sales and owner retirements. Thank you, lackluster recovery. Now, they’re able to think about big transitions as the market values of many formerly thriving local businesses slowly return to pre-crash levels.

This is starting to happen, after a long wait, and it’s especially important to think about big transitions. Estate planning is always a challenge for small business owners, and it gets increasingly difficult for families when there is no clear succession plan after death of the owner. For many business owners, a majority of their net worth is tied up in their companies. With federal estate taxes at 40% beyond the $5.34 million allowed under the federal exclusion, families or other beneficiaries are faced with the daunting task of finding the cash for the estate tax bill without liquidating the company.

Find the right help: Get some professional assistance. It’s highly unlikely that a forced liquidation will maximize the value of your business. There are many options, and you’ll need a knowledgeable planner to walk you through them.

Consider alternative options: One option is to use life insurance to provide liquidity for estate taxes. This makes sense particularly if most of the cash is tied up in your business, and you’re a bit house-poor. A premium finance loan allows an owner to cover the cost of insurance premiums without selling assets or draining the company of cash needed for business operations.  Since short-term interest rates remain near historic lows, this may be an efficient way to cover a large estate tax liability, particularly because lenders typically view these loans as very secure.

The bottom line: Have a plan in place before you turn in the time sheets for a time share.

Please note U.S. Bank and its representatives do not provide tax or legal advice, and U.S. Bank does not offer insurance products. Investment products are: not a deposit, not FDIC insured, may lose value, not bank-guaranteed, not insured by any federal government agency. 

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