Heritage Business Solutions - Transition

Asset Replacement Trust - Also called a life insurance trust, an asset replacement trust is usually set up in conjunction with a charitable remainder trust. In this scenario, income from the charitable remainder trust is used to pay the premiums on a life insurance policy on the life of the business owner. Following the business owner's death, the proceeds of the policy go to the beneficiary, typically the spouse and/or children and are not taxable as part of the owner's estate.

Business Plan - A business plan is a vital management tool that sets out of all the company's critical strategic and operational imperatives. The document typically includes descriptions of the company's products, competitors, markets, distribution strategy, financial projections and management team. The most effective business plans also contain and Exit Plan.

Buy-Sell Agreement - A buy-sell agreement is an agreement among business partners that specifies how shares in the business are to be transferred in the case of a co-owner's death. It establishes a predetermined business price and a buyer for the business interest.

Certified Financial Planner (CFP®) - A CFP is a person who has passed examinations accredited by the Certified Financial Planner Board of Standards, showing that the person is able to manage a client's banking, estate, insurance, investment and tax affairs.

Certified Public Accountant (CPA) - A CPA is an accountant who has met certain standards, including experience, age and licensing and passed state examinations.

Charitable Trust - A charitable trust is usually used to gift high-value assets out of the estate in order to minimize gains and estate taxes and create income for the business owner. This is accomplished by first donating assets into the trust and then having it pay the beneficiary for a stated period of time. Once the time-frame expires, the remainder of the estate is transferred to the charities designated as the beneficiaries.

Disability Buy-Out Insurance - Disability buy-out insurance establishes a predetermined price for the business and a buyer for the business interest if the business owner were to become disabled. It is often used with a buy-sell agreement to provide funding.

Employee Stock Ownership Plan (ESOPs) - In an ESOP, the employer contributes to a fund invested primarily in company stock and makes distributions in stock or cash. Employees who exercise a stock option under an ESOP do not pay tax on any gains until the stock is sold.

Enhanced Income Trusts - Enhanced income trusts eliminate capital gains taxes when a property that has appreciated is sold. They are also used to remove assets from the taxable estate and eliminate estate taxes.

Estate Planning - Estate planning is the overall planning of a person's wealth, including the preparation of a will and the planning of taxes after the individual's death.

Estate Taxes - Estate taxes apply when the owner transfers assets to heirs upon death. Estate taxes can be quite large, often forcing the beneficiary to sell some of the inherited assets in order to pay the required taxes.

Exemption Trust - An exemption trust can be used to greatly reduce or eliminate federal estate taxes for a married couple's estate. After the death of the first spouse, assets are placed in an irrevocable trust which is not taxed for federal estate tax purposes when the second spouse dies.

Exit Plan - An Exit Plan brings together all the elements of a successful business transition and effective personal financial planning, allowing business owners to leave their businesses on their terms and on their timelines.

Family Limited Partnerships (FLPs) - Family limited partnerships allow business owners to receive discounts when making gifts or transferring assets, protect assets from creditors and lawsuits, shift taxable income and remove highly appreciated assets from the estate.

Funded Living Trusts - Funded living trusts contain and hold title to all of a business owner's major assets, with the exception of the home, while they are still living, allowing immediate and total control over the assets should you die or become disabled.

Generation Skipping Transfer Taxes (GSTT) - Generation skipping transfer taxes were created to so that wealthy taxpayers would be unable to leave their estates to their grandchildren while limiting estate tax payments.

Gift Taxes - Gift taxes are a federal tax to be paid if a person receives gifts exceeding a set dollar amount per year. The law allows spouses to give gifts separately, doubling the value of the gift while still avoiding the gift tax.

Grantor Retained Annuity Trusts (GRATs) - Grantor retained annuity trusts allow business owners to retain the right to revenue after transferring discounted assets to a family limited partnership.

Initial Public Offering (IPO) - An IPO, or initial public offering, is the first sale of stock by a formerly private company to the public. An IPO can be a lucrative, though time-intensive and initially expensive, way to transfer business ownership.

Life Insurance - Life insurance is often used as a source of funds for buy-sell agreements and to pay estate taxes.

Trusts - Trusts are legal entities that can own assets, are managed by one or more trustees and have designated beneficiaries. They can play a vital role in exit planning because they allow business owners to control and protect assets while minimizing tax liabilities.