Visionaries Needing their own Visionaries

By. Philip “Rusty” Ross | July 28th, 2021 

Recently, my 7-year-old daughter and I were putting together a lego fire truck. My daughter is sharp, independent, and was doing a spectacular job, but I was called in several steps into the project as she ran into trouble. I was able to assist her with the immediate issue but noticed an issue coming as an earlier step was missed. Of course, this led to “DaAaaD, I have done it correctly!”. Though after forcing her to revisit the instructions, We located the missing step and piece that would allow the truck to be properly completed. Ensuring proper chronological steps are followed applies not only to benevolent fathers, but is especially true in many areas of financial, estate, and tax planning.

These chronological steps are acute for entrepreneurs who have built fantastic businesses that could be nearing a substantial liquidity event. Often, when these events begin to unfold, and the magnitude of the event becomes clear, many entrepreneurs begin considering shifting portions of the business ownership to a trust, charity, or family members for tax and estate planning purposes. Unfortunately, if they signed the letter of intent, or received an updated valuation it could hamper their ability to shift ownership as effectively to another party. The IRS has set several precedents through court cases that have impacted charitable gifts, adjusted valuations of gifts to trusts, or family members. Primarily as the process placed a definitive valuation on the company or created a legally binding agreement to sell prior to shifting ownership.

At Exencial, We work with our clients who are entrepreneurs or who are equity owner’s in a start-up company to understand the value of their equity, their personal financial needs, and long-term family goals to ensure shifting is completed before it becomes too late. As always, it is recommended to work with a financial advisor, CPA, or attorney to ensure the proper steps are taken at the appropriate point in time. Ideally, this will be before signing the letter of intent or undergoing an updated valuation for your closely held business or young company.

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