April 2017 eNewsletter

A Letter from Dad

Dave Foster, Foster and Motley

“As most of you know…it is my desire at the time of my death to be buried in the St. Patrick Mt. Hope Catholic Cemetery”.  Thus begins a letter from my dad to his kids, written, I might add, several years before he died, while still in pretty good health.

I share this personal anecdote to call you to action.  It may be an action you would rather not take.  Here it is:  Write that letter.  You know the one.  The one where you actually give some serious thought to your “final wishes.”  Write them down and share them with your loved ones.  Trust me, this will be a wonderful gift to your family.

Most of our clients have Wills, Trusts, Powers of Attorney, etc.  Those are all critically important.  But, unfortunately, I think the “softer side” of the estate planning gets the short end of the stick.  I have been helping families with financial planning for over 20 years now; so naturally, I’m beginning to work with families as they lose loved ones.  Even in the “best situations” it is a stressful, emotional time for a family.

Ok, specifically, what am I talking about?  First off, I am not talking about pre-paid funeral expenses or buying a cemetery plot – though both are perfectly reasonable and might be part of the overall “final wishes.”  I am really talking about being clear about your final wishes on such simple issues as:

  • Will you be buried or cremated?
  • If buried, where?
  • What type of ceremony/celebration would you prefer?
  • Do you want memorial gifts to any special organization?
  • Anything else your loved ones should know?

This is not an exhaustive list by any means, and you may think some of these are obvious, or that “everyone knows” but don’t count on that.  Look ahead – you are gone (and unreachable even on your cell) and your loved ones are faced with some tough decisions in an emotional, stressful time period.  Do you really want them arguing about what type of service to have?  

While avoiding disagreements is important, perhaps more valuable is the sense of honoring your final wishes.  It provides your loved ones some peace and closure to honor and respect those wishes.  I had one client who picked out the music to be played at his funeral Mass, and the last song that was played is a popular one (“Centerfield” by John Fogerty), and it really tied in with part of the eulogy his brother gave.  To this day, every time I hear it I can’t help but think of him and smile.

So far, I have not mentioned what to do with “your stuff.”  I am not talking about investments, real estate, IRA’s, etc.  Those should be handled through your legal documents and beneficiary designations.  I am speaking of family photo albums, wedding rings, and the awesome grandfather clock.  The more direction you can give your executor and heirs about this stuff the more likely it is that the whole process is smooth and harmonious.  And don’t underestimate the psychological value of seemingly meaningless junk.  To your son or daughter that faded yard ornament may be priceless.  If you or your spouse don’t deal with this, it will be left to others to figure out.  I have, unfortunately, witnessed some sad “negotiations” among family members that have led to hard feelings and broken relationships.  Nobody wants that.

I am not talking about a legal document here (though certainly, if you have a lot of “stuff” you might consider incorporating it into your Will or as an attachment to that Will).  I’m talking about a written communication that simply states your final wishes.  And while not absolutely critical, I would highly recommend this be shared and discussed with your loved ones while you are still around.  Needless to say, these “final wishes” will almost certainly change over time and your letter will need to change as well.

This really is a wonderful gift that each of us can give our loved ones, to be used when they need it most.  I am so thankful that my dad did this for us.  And since I started off with my dad’s letter, I’d like to share his closing with you:

“This letter is not meant to infer that I expect to use the above services in the near future, this is for information only.  With Love and Laughter, Your Dad.”

Thanks, Dad!

Business Valuation Is a Critical Step in the Transition Process

Crystal Faulkner & Tom Cooney, Partners with MCM CPAs & Advisors

The value of your company is something that should always be on your radar, but it should be even more front of mind as you approach retirement or an exit. Building value can come in many different forms, with the most obvious being building value with the goal of becoming more profitable.  Some build value with an eye on growth, while still others want to use systems that build value to become more organized. These are all great motivators, but in exit planning, you often want to take a longer view that will prepare business owners to exit their companies when they choose and for the amount they need or desire to enjoy the next phase of their lives comfortably.

Building value is one of the most important parts of any exit planning strategy. When we discuss building value in the context of exit planning, we usually encourage business owners and stakeholders to do the following:

Evaluate current value

In exit planning, because the company’s current value is so critical to the work that follows, guesses and assumptions are grossly inadequate. Business valuation experts must be consulted to establish some sort of benchmark for the company’s current worth in order to move forward with the process.

Establish future goals and objectives

Exit plans are designed to quantify the amount an owner will need to support their preferred, post-exit lifestyle, and then establish the milestones needed to reach that goal. Usually, the owner will work with a financial planning or accounting professional to establish working assumptions, like life expectancy, future value of other assets and rates of return on active investments. Owners also must ask and answer hard questions about what they want their post-exit life to look like from a spending standpoint. A workable plan must start with an accurate and realistic idea of where it is meant to lead.

Determine the tactics

Once the gap between current and desired business value is established, owners and their consultants can decide what needs to be achieved to reach the end goal, and what needs to be accomplished and when with an exit date in mind. A time frame is a must—it will keep owners accountable to intermediate milestones and keep the plan on track.

By using gap analysis as the foundation for exit planning, owners can identify and implement specific tactics. There are many options, and an exit planning professional can walk you through many of them, but the most important are those that will prepare the business to operate in the absence of the owner. These include the installation or training of a highly skilled management team that is just as passionate for the company as its owner(s), the use of current financial information to track and alter company performance, and the implementation of sustainable, forward-thinking systems and processes that will keep your company ahead of the curve.

Consider transfer options

Any good exit planning strategy is going to consider tax implications. Owners want to use every legal tactic they can to minimize taxes while they earn money, grow value and transfer that value. Owners should use knowledgeable advisors long before the eventual transfer of their companies in a way that limits the tax burden (as far as it is possible) for both the seller and the buyer.

If you’d like more information about increasing the value of your business in the context of planning your exit, please consult with a tax or exit planning professional.