CLIENT STORY
Family & Business Continuity and Succession - Passing on My Business
Wealth Strategy
The Situation:
Michael, the owner of a closely held chemical company, is ready to retire and is preparing to turn over ownership of his business to his three children.
Like many business owners in this situation, Michael wants to preserve the integrity and reputation of his business after he retires. However, he is concerned about treating each child equally and doing what is right for the business.
His eldest child, Kristin, is highly involved in the business and has the leadership skills and business savvy to succeed him. Dylan, his second child, is married, lives in another state and works in a completely different field. Suzanne, the youngest, works for the company but isn’t inclined to participate in the management of the business.
How will Michael fairly divide the business’s value among the children, given their varying degrees of involvement?
The Solution:
To help ease Michael’s worries, a PNC Wealth Strategist worked with Michael’s attorney to formulate a proposed plan to pass controlling interest in the business to his eldest child, Kristin. This would be accomplished by issuing her voting stock in the company, while giving Suzanne non-voting stock.
Since Michael’s outside assets are not sufficient to allow for an equalization of his personal assets among the three children, the PNC Wealth Strategist also recommended a life insurance policy on Michael’s life. The policy would be purchased and owned by an Irrevocable Life Insurance Trust (ILIT). It could provide both liquidity to the estate and cash to Michael’s son, Dylan, in an amount equal to the value of the business interests passing to Kristin and Suzanne. It could also provide cash to equalize the gift to Suzanne, if necessary.
This solution helped Michael achieve his goal of retaining control of the business within the family, while equalizing gifts among all three children.
About Wealth Strategy
As a client of PNC Wealth Management®, you’ll have access to an experienced PNC Wealth Strategist who can help identify and articulate financial, tax, estate planning, insurance and philanthropic issues. They will assist you in identifying your financial goals and create strategies to keep you on track.
Important Legal Disclosures & Information
This story represents a hypothetical scenario and is intended for illustrative purposes; the person described is fictional and not an actual client, but the scenario is intended to reflect a typical and/or previously experienced situation. Actual client experiences and outcomes may vary and future performance or success is not guaranteed.
The PNC Financial Services Group, Inc. (“PNC”) uses the marketing name PNC Wealth Management® to provide investment consulting and wealth management, fiduciary services, FDIC-insured banking products and services, and lending of funds to individual clients through PNC Bank, National Association (“PNC Bank”), which is a Member FDIC, and to provide specific fiduciary and agency services through PNC Delaware Trust Company or PNC Ohio Trust Company. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC Bank is not registered as a municipal advisor under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“PNC Wealth Management,” is a registered mark of The PNC Financial Services Group, Inc.
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