Category: Wills & Trusts

Retirement Planning for Business Owners

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For many employees, saving for retirement is usually a matter of simply participating in their employer’s 401(k) plan and perhaps opening an IRA for some extra savings.

But, when you’re the owner of a business, planning for retirement requires pro-activity and strategy. It’s not just the dizzying array of choices for retirement accounts, there’s also planning for the business itself. Who will run the business after your retirement? Additionally, your estate plan must integrate into your retirement and business transition strategy.

Owners of businesses (like employees and everyone else) want to make sure they will have enough money in retirement. Business owners recognize the value of their businesses, so they are often tempted to reinvest everything into the enterprise, thinking that will be their “retirement plan.” However, this might be a mistake.

Retirement Accounts for Business Owners

Rather than placing all your eggs in one basket, it makes sense to have some “backup” strategies in place. There are many retirement account options open to business owners. Although the number of options can make things confusing, a tax and financial professional can often quickly make a recommendation for you.

For example, you may consider opening a 401(k), SEP-IRA, SIMPLE, or pension plan. This can reduce your income taxes now, while simultaneously placing some of your wealth outside your business. From a financial perspective, these account are tax-deferred, so the investment growth avoids taxation until you retire, which greatly boosts returns. The “best” plan really depends on how much income your business earns, how stable your earnings are, how many employees you have, and how generous you want to be with those employees. You must consider how generous you’ll be with employees because the law requires most tax-deferred plans to be “fair” to all employees. For example, you can’t open a pension or 401(k) for yourself only and exclude all of your full-time employees. When making this decision, consider that many employees value being able to save for their retirement and your generosity may be repaid with harder work and loyalty from the employees.

Depending on how many employees you have, you may even consider “self-directed” investment options, which can allow you to invest some or all of your retirement funds into “alternative” investments, such as precious metals, private lending arrangements, real estate, other closely held businesses, etc. These self-directed accounts are not for everyone, but for the right person, they open up a wide world of investment opportunities. The tax rules surrounding self-directed tax-deferred accounts are very complex and penalties can be incredibly high. So, if you choose to do self-directed investments, always work with a qualified tax advisor.

Outside of your business, you can likely contribute to an IRA or a Roth IRA. This can allow you to add more money to your retirement basket, especially if you’ve maximized your 401(k), SEP, or SIMPLE plan. Like the other tax-deferred accounts, self-directed IRAs are also an option, opening up a broad world of investment options.

As a business owner, you likely have a great deal of control over your health insurance decisions. If you’re relatively young and healthy or otherwise an infrequent user of health care services, consider using a high deductible health plan (HDHP) and a health savings account (HSA) to add additional money to your savings. These plans let you set aside money in the HSA which can be invested in a manner similar to IRAs. At any time after you setup the account, you can withdraw your contributions and earnings, tax-free, to pay for qualified medical expenses. And, after you turn 65, the money can be used for whatever purpose you want, although income tax will need to be paid on the distributions.

Selling or Transferring the Business

Many business owners dream of a financially lucrative “exit” when a business is sold, taken public, or otherwise transferred at a significant profit for the owner. This does not happen by accident – a business owner must first create and sustain a profitable enterprise that can be sold. Then, legal and tax strategies must be coordinated to minimize the burdensome hit of taxes and avoid the common legal risks that can happen when businesses are sold. When a business is sold, the net proceeds can form a significant component of the owner’s retirement. When supplemented by one or more of the retirement accounts discussed above, this can be a great outcome for a business owner.

On the other hand, other businesses are “family” businesses where children or grandchildren will one day become owners. Like their counterparts who will sell their businesses, these business owners must also focus on creating and sustaining a profitable enterprise, but the source of retirement money is a little less clear. In these cases, clearly thinking through the transition plan to the next generation is essential. Although the business can be given to the next generation through a trust or outright, there are also transition options to allow for children, grandchildren, or even employees to gradually buy-out the owner, if the owner needs or wants to obtain a portion of the retirement nest egg from the business.

The Importance of Estate Planning

Regardless of which retirement accounts (401(k), SEP, SIMPLE, IRAs, HSAs) you select, it is wise to integrate them into your estate planning. You’ve probably already considered who you want to take over your business after you retire (perhaps a son or daughter or a sale to a third party). For your retirement accounts, an IRA trust is a special trust designed to maximize the financial benefit, minimize the income tax burden, and provide robust asset protection for your family. These trusts integrate with the rest of your comprehensive estate plan to fully protect your family, provide privacy, all while minimizing taxes and costs.

Leverage the Team Approach

Let us work with you, your business advisors or consultants, your tax advisor, and your financial advisor to develop a comprehensive retirement, business transition, and estate planning strategy. When we work collaboratively, we can focus on setting aside assets for retirement, saving as much tax possible, while freeing you to do what you do best – build your business!

Give us a call today so we can help you craft a retirement, business transition, and estate planning strategy.

Estate Planning: 3 Reasons We Run the Other Way

Estate Planning: 3 Reasons We Run the Other Way

We understand that it feels hard to get around to estate planning; it sounds about as fun as getting a root canal. However, we also understand that we all want to make sure that our loved ones are protected and receive our hard-earned assets – regardless of whether we have $10 million or $10,000.

Don’t let these common roadblocks stop you from protecting yourself and your family:

  1. Who Wants to Talk About Death? Discussions of death, dying, and illness – money and family – will and trusts – make many folks uncomfortable. Of course, that’s normal.  But, don’t let a few minutes of feeling uncomfortable stop you from taking care of yourself and your loved ones.
  2. This Isn’t a Good Time. Everyone is busy. We understand that, but there’s never going to be a better time. Call our office, get on the calendar, and get it done.
  3. I Don’t Get It. Estate planning is documented in legal papers; finances are discussed; the law is analyzed. It’s common feel uncomfortable in a world you’re not familiar with.  If that’s what you are thinking, you are not We will translate complex legal concepts into everyday layman’s terms for you, just like we do for everyone else.

The truth is that estate planning isn’t really that bad. In fact, with our help, estate planning is easy. We’ll chat with you about your goals and concerns, analyze your family and financial situation, and work with you to come up with a solid plan. You provide the information, which we always keep confidential, and we’ll take care of everything else.

5 Estate Planning Tips for Your Retirement

Retirement is something most try to avoid thinking about, but you will eventually be forced to take it into consideration due to its effects on the later stages of your life. After all, no one wants to be short of money to spend when they quit their jobs. People do not want to be working their entire lives (unless you’re passionate about something, of course!).

If you are close to retirement, one thing that has probably been on your mind is your estate plan. If you’re not sure where to start, then we will be going through some of the most important points in this guide with five useful estate planning tips.

Estate Planning Tip #1: Create a Will

It is understandable that you do not want to think about your will just yet. Growing old isn’t exactly the most exciting point in your life so thinking about a will before you even retire might be strange. Sadly, it is an important part of your estate plan that you should attend to as soon as possible. Your estate plan will decide who inherits your assets such as your property, car, valuable items, and even your digital accounts which is why it is important to draw up plans at an early stage.

You want to approach creating your will wisely; that being said, contact a lawyer. An attorney will help you come up with the right words and structure for your will so that when it is used your executor will have a much easier time carrying out your will. Just remember that certain things cannot be put on your will which is why it is important to have a trusted attorney to walk you through the process.

Estate Planning Tip #2: Planning Tax-Efficient Strategies

When you leave behind a large sum of money to be inherited you may be forced to pay high amounts of tax. Thankfully, it is possible to reduce the amount of tax you pay by utilizing tax-efficient strategies. For example, donating to charities means you do not pay tax on those assets you own. This could be a sum of money or something valuable. If you own something that you do not want to pay tax on when handling down to your relatives and loved ones then simply donate it and you will be spared the tax charges.  If you do not want to give it away, there are life insurance options we can talk about to offset taxes.

Some assets are free from estate taxes. For example, a life insurance policy can be left to someone without being forced to pay tax on it. Retirement accounts are also exempt from estate taxes.  It is good to learn where you can and cannot avoid paying taxes. Do not worry if you are unsure—your professional lawyer (Intrepid Law) will be able to guide you through this step with ease.

Estate Planning Tip #3: Cover Expenses with a Trust

If you feel like there will be monetary issues when you are no longer around, then it might be worth using your current assets to cover expenses by using a trust plan. Whether it is schooling fees, insurance payments, or even health care, our experienced lawyer can help you set up a trust that can be used to pay for future expenses when you have passed away.

Here is an example of how this works:

Let’s say that you want to provide a great education for your grandson when he comes of age. You can set up the trust to trigger when your grandson reaches the age of 18 where they receive the money you have left in the trust to pay for their college tuition. However, the money must be used for the agreed purpose or else the money will not be released. Using a trust to cover expenses is a great way to feel at ease when you are close to passing on. Many want to provide for their family even when they are not around and it gives your loved one’s peace of mind for their futures.

Estate Planning Tip #4: Use Your Life Insurance to Offset Taxes

The people you have entrusted your assets to will likely be subject to fees and income taxes. This can put them under a lot of financial stress despite inheriting all of your assets. Thankfully, you can use your life insurance to offset those costs so that they can cover all of these payable taxes.

For instance, if your estate planner does the calculations and estimates that a total of $250,000 needs to be paid in estate and income tax, then you can set up a life insurance plan in their name. The beneficiary of your life insurance is not forced to pay tax, so they may use the $250,000 to help pay the taxes owed on the assets inherited. This is a brilliant tax-efficient strategy that will help your loved ones a great deal.

Estate Planning Tip #5: Hire a Reputable Estate Planning Team

Estate planning is not something you can do on your own easily. It takes a great deal of patience, knowledge, and understanding of the law in order to accomplish everything and hiring just a single person will not cut it. You need several experts that are knowledgeable in their fields if you want to get the best estate planning assistance possible.

This usually consists of an estate planning attorney, a tax specialist, and possibly a financial advisor. These are three main roles you will need in your team. The estate planning attorney will help you write up a will and set up any trusts that you may want. This helps ensure that your plan will meet any federal and state criteria so that it becomes legally binding. You must find a professional that knows the law in your state. For example, if you live in Missouri then you will need to find a lawyer from a city such as St. Louis.

The tax professional will be helping you minimize the amount you have to pay in taxes, and your financial advisor will help you design an investment portfolio for the assets you have. Make sure your financial advisor has some experience with estate planning before you hire them.  While we do not offer investment advice, Intrepid Law can assist you with both estate and tax planning.


Hopefully, these five tips have given you some insight into estate planning and how you can prepare for your retirement. Make sure you do this as soon as possible so you can enjoy the rest of your life as a carefree soul.