If
you’re a successful business owner, it may be high time to conduct a financial stress
test on one or more aspects of your business and wealth planning.
Avoiding a family war.
Stress test equals peace of mind.
A few years ago, I was
introduced to a billionaire family that was feeling uneasy about some aspects
of their wealth planning. The family’s advisors were very creative and, as a
result, the family paid very little in taxes on both the business and personal
side. They asked me to stress test the financial and related legal strategies
that were being used to get them this near-zero-tax result.
The end result: Just about
the same tax outcome with far less risk.
Avoiding a family war.
In another stress testing a situation involving an estate plan, a billionaire patriarch (on the advice of
counsel) had taken an “even” approach in terms of the inheritances to his four
children rather than a “fair” approach. Each child was set to receive an equal
share of the estate -- including equal ownership stakes in the
200-plus-year-old family business, even though only one of the four was
actively involved in the company (as president by the way).
Stress test equals peace of mind.
These two examples illustrate
the value that financial stress testing can bring to wealthy entrepreneurs and
others who may be worried or uncertain about how their wealth planning efforts
are likely to play out.
The rationale to engage in
financial stress testing is twofold:
- To
make certain you avoid potentially economically and legal destructive
situations
- To
ensure you’re benefiting from all possible opportunities
Financial stress testing is
very common among the super-rich -- individuals with a net worth of $500
million or more. It’s a powerful way for them to make sure their investments or
wealth planning is in alignment with their goals, appropriately
state-of-the-art and cost-effective.