Most successful business owners reach a critical juncture where they need to plan for the transitioning of their wealth from their business to a personal investment strategy to ensure its continued growth and preservation. Selling their business is the culmination of years of hard work and sacrifice. It should not be met with fear and trepidation over the next chapter of their life.

A liquidity event often represents a significant magnification of your wealth in a short period of time. Having a plan in place for the transition of wealth from the business to a well-conceived investment strategy frees the business owner to focus on living the life they have always envisioned. Beyond an investment strategy, business owners must take a holistic view of their wealth regarding how they can achieve their life ambitions and aspirations for their family and legacy. This should include the following:

The Intentional Use of Your Money

Often neglected in the flurry of legal documents and issues that need to be addressed when selling a business is the critical discussion of the life-changing implications of a liquidity event. Having these pre-transfer discussions along with a vision for how you want to use your money is vital for several reasons:

Providing a more secure retirement. If you and your family want ongoing income to support your retirement needs, there may be ways to construct the sale to do so. For example, any real estate used by the business could be retained in your name so you can receive rental income for a while. You also need to consider whether any other company-provided benefits, such as health insurance, could be continued as part of the sales agreement.

Plan for major purchases: It’s not uncommon for exiting business owners to celebrate the "ringing of the bell" by splurging on some big-ticket items, such as a luxury car or a vacation home. These purchases should be planned as part of the vision you share with your spouse.

Your ambition for a good life. Following a liquidity event, your wealth will likely expand, which can secure your financial future. But what are your new priorities? What is your new purpose in life? How will you use your wealth to achieve your legacy and philanthropy goals? Do you and your spouse share the same ambitions for a good life for the rest of your lives? These discussions must begin at home before the business is sold.

Maintain Your Lifestyle

For years, your business was your primary asset and a predictable source of income you needed to maintain your lifestyle. With the sale of the business, your balance sheet suddenly changes, requiring the careful management of objectives where income and risk are critical considerations. This can present a challenge to families as they attempt to navigate the changes to sustain a desired lifestyle and sustain their wealth across generations.

To be prepared, a comprehensive plan should be developed before the sale of the business and include these elements:

• Clearly define your financial objectives using realistic values and growth assumptions based on risk factors
• Design an investment and cash flow strategy to support the family’s lifestyle while providing a safety net
• Establish aspirational goals and generational intentions that can be achieved within the plan’s framework

Such comprehensive planning typically requires the input and coordination of advisors from multiple disciplines. Your financial advisor acts as the "quarterback" of the team to ensure the plan is fully integrated and implemented based on your vision.

Growing and Preserving Your Assets

For business owners, wealth is built through concentration in their business, but ultimately, it is preserved through diversification. To ensure your post-sale assets continue to grow and are preserved for future generations, it is essential to have a well-diversified investment strategy based on your specific objectives and risk tolerance. While a diversified investment portfolio may never match the returns generated by your business, it serves the essential purpose of preserving your wealth and providing a backstop for your family’s security.

Planning Your Estate

Pre-transfer planning must be done in coordination with the business owner’s comprehensive estate plan. Among the key components to consider is trust planning. Trust planning offers a number of benefits, including

• Ensuring wealth gets distributed according to your intentions
• Protecting your heirs’ inheritance from a spouse should their marriages end in divorce
• Providing an independent trustee to help manage assets
• Avoiding transfer tax on appreciating net-worth post-sale

Although the recent tax law change doubled the federal estate tax exclusion limits, using trusts for effective tax planning is still recommended because the current exclusion limits are scheduled to expire at the end of 2025 - or sooner if a different political party occupies Congress and the White House.

You Don’t Have to Go it Alone

There are few things more life-changing than a liquidity event. It takes extensive preparation - financially and emotionally - to ensure the successful transition of wealth so that it can be preserved and used in pursuing new ambitions. There is no more critical time to have a team of trusted advisors with deep experience working with business owners - pre- and post-sale - to help manage a once-in-a-lifetime transition.