As a successful business owner, the people closest to you likely rely heavily on you. They may also have expectations regarding your wealth. Your plans for how you’ll disperse your wealth, and the expectations others may have, can have major effects on your future.
Let’s look at a story of how one business owner’s plan to use the wealth he had grown through his business was contrary to the expectations of those close to him.
The charity case
Hank Thatherton had built his wealth growing his business for over 30 years. Throughout those years, he quietly donated large sums of money to local charities. In fact, the only people who knew were himself, his wife, his advisors, and the charities themselves.
His sons occasionally worked in the business but never showed the drive Hank showed. Nonetheless, they and their families lived comfortably because of Hank’s support.
When Hank announced his plan to retire, his sons were thrilled. They told him about all their plans for how they’d use their inheritance—to get their children into top-notch schools, to found their own businesses, and to take trips around the world (and he could come with them if he wanted).
“Boys, you’ll be getting some money, but you might want to slow down,” Hank told them. “You don’t know this, but for years, I’ve donated millions to charity. I intend to do so after I retire, too.”
Hank’s sons were furious. They felt he was shortchanging them and their families. They questioned how he could be comfortable supporting strangers over his own flesh and blood.
After expressing his disappointment with his sons’ attitudes, he turned to his advisors.
“Am I doing something wrong?”
Setting expectations for your wealth
When you grow your wealth through your business, it could cause others in your orbit to start foisting expectations upon you. Whether those expectations are valid or not, they can affect your future, your planning, and your legacy.
However, it’s important to remember that your wealth is your wealth. What you choose to do with it should always be in your control. To best position yourself to remain in control of your wealth, it’s a good idea to take three steps.
1. Assure your wealth provides financial independence
Assuring that you can live comfortably on the wealth you’ve built in your business is the first step in planning for a successful future.
It’s similar to being on an airplane in an emergency—you need to put your oxygen mask on first before you help others. If you aren’t in a good financial position, it’s extremely challenging to help others.
Your Advisor Team can help you determine what you’ll need to live comfortably once you leave your business. From addressing Asset Gaps to determining what your longer-term goals for your wealth may be, you can find support in a strong Advisor Team.
2. Create a written plan for your wealth
Creating a written plan for your wealth can offer several benefits;
First, it helps you focus on what it is you’re trying to accomplish with your wealth. In Hank’s case, he wanted to use his wealth to continue his charitable legacy. Writing this goal down could help him focus on implementing strategies to allow him to achieve it on his terms.
Second, having a written plan can help you discover gaps in your plans. For example, you may discover that pursuing a certain goal may require you to sell your business to a third party, rather than keeping it in the family. This could give you more time to adjust your strategies to fit your needs.
Finally, a written plan helps you prepare yourself and those who rely on you for what the future may look like. Change can be scary, especially if people have different expectations from you. A written plan can give you more confidence in your decisions and provide a clearer road map toward success.
3. Communicate your plans in advance
Communicating your plans with those who rely on you in advance is an important step in setting expectations and pursuing your goals successfully.
This communication should not be viewed as “asking for permission.” It’s your wealth, and you get to do with it what you want. Communicating your plans is a method of preparing yourself, your family, and even your business for a successful future without you at the helm of the business. It can also give you more time and confidence to address any fallout if your plans don’t align with the expectations of others.
It can sometimes be easy for those who rely on your success to take things for granted while you run the business. So, the magnitude of your decision to leave it—by choice, death, or otherwise—can have profound effects on your future, their future, and whether you consider your post-business life and legacy successful.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
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Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
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