Transferring Wealth to the Next Generation: A Guide for Business Owners

When planning for the future, both business owners and non-business-owning parents will likely look at transferring their wealth to the next generation. While business owners have different tools at their disposal to transfer wealth, the fundamental questions to ask when considering a wealth transfer remain the same if you don’t own a business. You’ll always want to ask how much wealth you want to keep, how much wealth you want the kids to receive, and how to avoid tax consequences as much as possible.

For business owners, you’ll need to think about these questions within the context of your overall exit plan. How much money you wish to have after exiting your business will help guide the process. After establishing a financial exit objective, you can answer the questions above and design a plan to transfer your wealth. A solid plan should contain at least these three steps:

  1. Fixing your financial objectives before considering a wealth transfer.
  2. Determining the amount of wealth to transfer, and determining how much is too much.
  3. Designing a wealth transfer strategy that keeps the IRS from becoming the largest beneficiary of the owner’s hard-earned cash.

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