Bulletproof: Wealth Protection for Business Owners
BY Lewis Schiff
On Tuesday, July 28 and Wednesday, July 29, Inc.'s Business Owners Council Greater New York chapter met at three different sites in Long Island, Manhattan and northern New Jersey to discuss a topic of great importance to business owners: wealth protection.
"For most business owners, if they were to lose everything to a deal that went wrong or an unexpected event, they are too old and have worked too hard to re-build from scratch. That's why people who've created wealth need to take steps to protect what they've got," says Russ Alan Prince, president of Prince & Associates, the leading family office consultants for high net worth families.
Accounting firm Rothstein Kass, which serves family businesses and small-to-medium size business, collaborates closely with Russ Prince and served as the event's sponsor and co-host.
Prince, whose clients are more likely to be billionaires with names we'd all recognize, shared with the assembled business owners in the room, some of the techniques used by the uber-wealthy.
"It's not always 'black boxes' and secret formulas. Some of it is just asking the right questions and making sure you keep up to date with the steps you've already taken to protect yourself," says Prince.
Prince, along with Tom Angell, a partner at Rosthstein Kass, listed off several areas where change can lead to increased exposure for business owners, including:
'¢ Marriages and divorces (yours, your kids, your partners, your partners kids)
'¢ Change in the value of your business
'¢ Changes in tax laws (state and federal)
Some of the more colorful ideas Prince suggested were in areas of planning that most active business owners already pay special attention to:
'¢ Estate Planning: Prince proposes "freezing your estate" so that the future growth in the value of your assets takes place outside of your personal estate, thereby reducing estate takes.
'¢ Retirement Planning: Prince shared with the audience the pitfalls and opportunities of current retirement programs, along with some creative solutions to maximize the benefits of retirement planning for the business owner.
'¢ Cash flow management: Every business needs to master cash flow management in order to survive and thrive. Prince presented a method called "equity stripping" as a way to protect hard assets from litigation while simultaneously creating new investment opportunities for businesses.
'¢ Asset liability planning: The attendees became particularly excited when Prince illustrated strategies designed to turn property and casualty plans into super-charged investment vehicles called "captive insurance" programs.
Prince and Angell pointed out that business owners, who typically own assets and control cash flow, have the greatest opportunity to maximize asset protection planning, more so than those whose wealth comes predominantly from salaries. But Prince cautions those who are interested in protecting their assets about waiting too long. When asked to make predictions about future changes in tax laws and regulations, Prince offered a brief and characteristically sarcastic response: "Taxes are going up. Is that even a prediction anymore?"
Additional resources on the topic, asset protection, are provided by our sponsor, Rothstein Kass.
Rothstein Kass' New Jersey Tax Alert
Especially for New Jersey business and residents: On June 29, the state of New Jersey enacted legislation individual income tax rate increases for both resident and non-resident taxpayers.
Changing of the Guard
Request Rothstein Kass' upcoming proprietary research report ahead of publication. According to Rothstein Kass, the report "provides an in-depth look at how single family offices are adapting to operational, generational and strategic challenges."