Strategies include:

• Employee Stock Ownership Plan (ESOP)
  
• Intra-Family Buy-Sell
  
• Executive Boot-Strap Purchase
  
• Third Party Sale
  
• Strategic Stock Transfer
  

Case Study:

This well established family owned business employed 350 people and was a leader in their industry. Like many closely held businesses, the founder was a maverick and resisted the idea of planning for the eventual transfer of the business. Further complicating the situation was the fact that one son actively worked in the business while three others did not. The family wanted to treat all children "equally" from a financial standpoint but understood the importance of not burdening the active child with his non-active siblings. The family had a basic Revocable Family Trust in place and a small key-man life insurance policy on the life of the owner. There was a strong core group of key people that had helped to grow the company and would need to stay in place in order to continue the profitability of the company. The family had several goals; 1) plan for the orderly transfer of the business in the most tax efficient manner possible, 2) treat all of the children equally and, 3) provide for the non-family key employees in the process.

Planning Strategy

In order to facilitate a breakthrough in moving the client forward with his planning, a team was assembled that consisted of the client's CPA and chief legal advisor. A series of planning meetings identified the primary family goals and summarized the client's current financial circumstances. Over the course of the next six months, a complete plan was developed and implemented consisting of:

• Establishing a Deferred Compensation plan that provided post-retirement benefits to the founder and his wife. The addition of this plan established a liability on the books of the entity, thereby reducing the valuation of the business for tax purposes.
  
• Deferred Compensation payments are fully tax deductible by the entity as opposed to non-deductible installment purchase payments. Although the owner received the identical after-tax cash flow, the pre-tax cash flow required to support these payments was significantly reduced.
  
• Key-employees were tied to the company utilizing a combination of "golden handcuff" plans that served to reward them for past service as well as incentivize them for future performance.
  
• Life insurance was purchased inside of an Irrevocable Life Insurance Trust that would eventually be available to provide cash that would "equalize" the distributions to each of the four children. Additional life insurance was also needed to provide the liquidity needed for payment of Federal Estate Tax. The company loaned the premium payments to the trust in order to fund this arrangement.
  
• The client reviewed the possibility of utilizing a partial ESOP (Employee Stock Ownership Plan), however, ultimately decided that it didn't fit his needs.
  
• An installment note was established allowing the active son to purchase the company over the next ten years at a reasonable interest rate.
  
• The founder will continue to work for the entity as a consultant and also receive significant rental payments from the lease of the building that the entity is occupying.