In 2015, I met Ron while on a fishing trip in Texas. We got to talking and he had developed a patent for a system for power plants across the US. Over many years, he had built a very successful business that he wanted to pass to his kids. I worked with his attorney and CPA and designed a plan for him to transition the business to his two kids, over a 5 year period. He was concerned about his youngest son, as he had not appeared very motivated up to this point and was the irresponsible one of the bunch. When Ron and I met with his children and their spouses on the plan for transition, a new light brightened into Steve. He really took ownership. I met with Ron the other day and the business has really blossomed since the transition and Ron’s grandkids have now finished college and are working in the business as well.
What a blessing to see something you developed, pass down to several generations. How did we do it. First, I listened to what Ron wanted (while on a second fishing trip, as we both loved to fish). Then, strategically designed a plan that would protect the business and slowly transition it with several fail safes in place, just in case we had to use them. Next, we had his attorney draft the legal documents, then got the CPA on board and finally implemented it.
Ron wanted 200k of income each year, so we implemented several steps to make that happen. They also owned a building worth about 1 million in 2015, it is now worth about 2 million. The building is held in an LLC that Ron owns, and the company pays rent to Ron of $100k per year. In the end, the building will pass to the kids with a step up in cost basis, under the current laws. So if current tax laws hold, kids will inherit a 2 million building with no taxes owed upon parents death.
Finally, Ron was a really good person and felt very blessed over the years. He wanted to share some of the blessings he had received with several charities. We also developed a Charitable Remainder Trust, that pays Ron and Sherry an income stream of 50k per year for life and around 1 million of his estate goes to the Charities he chose tax free when it is all completed.
I love working with families to design very structured, tax efficient, low risk transition strategies. I had a former Oil Company owner, that has since passed, but said it best.
God, Family and Charity. You see governments can pass laws to take money from business owners, charities cannot. He was very wise and made sure he took advantage of all tax laws that allowed his business to donate to charities, which make the world a better place.