Whether you are considering the sale of your company or have just completed that process, this is the time for a solid financial plan.
What exactly does a financial plan entail? To begin with, you and an adviser will map out your annual income streams, such as salary, pension and income from real estate and investments. On the other hand, all expenses, for living expenses, plans in the pipeline, but also, for example, gifts.
If a minus remains after taxes, then additional assets come into play. Think of liquidities, a securities portfolio, rental income from investment properties or a vacation home. This also includes the sales proceeds from the business or, if the business is still active, the capital in the private limited company. A financial plan will show which pots you can best use.
The final piece of the financial plan is the composition of the investment portfolio, a job for the specialist. After taking stock of the financial position, a specialist like me performs a scenario analysis to determine the appropriate risk profile and the best investment approach.
I'd like to give you 5 reasons not to wait with your own financial plan.
1. Be certain about the future now
Entrepreneurs often don't turn to a financial planner until after the sale of their business, at which point there are significant assets that need to be addressed. It works better to make a financial plan even before the sale. If you know what you need to fulfill wishes for the future, you can still turn the necessary knobs during negotiations. You know where you stand, and that gives overview and peace of mind during an exciting period.
2. Solid foundation for financial decisions
A financial plan provides in-depth insight into your financial situation. This makes it easier to make informed decisions with significant financial consequences. Think about retiring early, the timing of the sale of your company, the restructuring of your assets, the purchase of that dream vacation home, a trip around the world. How feasible is it all? A financial plan provides that insight.
3. Manage risk
The future is not only made up of opportunities; there are also risks. To manage them, they too are part of the financial plan. What are the financial consequences of possible death, divorce or disability? As you get older, you will have to consider healthcare costs, such as private care. In order to keep sufficient reserves in reserve, it may be wise to keep a wary eye on plans for gifts to the children.
4. Stay flexible
Life is changeable; the plan moves flexibly with it thanks to an annual update. Together with your adviser, you can check whether your situation and wishes are still the same and how your income is doing. Say you've moved house or divorced, the return on your investments turns out differently than expected, tax law changes affect your assets or - like many former entrepreneurs - you want to invest in a business again. The consequences can be calculated in the financial plan. In this way, you maintain a permanent overview of the feasibility of your objectives, without losing your maneuverability.
5. Make smart gifts to children and grandchildren
The financial plan transcends your own generation. With financial planning, we also consider estate planning. What is estate planning? Passing on assets in a sensible and tax-efficient manner. Transferring assets to your (grand)children during your lifetime can be beneficial, thanks to the annual gift exemption and by donating within the lower gift tax rate. If you choose to donate under guardianship, a trustee watches over the assets up to a certain age and gives approval before the money is spent, for example on a specific purpose, such as an education or a home.
If you make a donation to a securities account in the name of the children or grandchildren, you can familiarize them with investing. An additional advantage: the capital gains from the portfolio also go to the children, which saves on inheritance tax later on.
Business sale in or in sight? Give direction to the proceeds
On several dates in the near future, Delen Private Bank will organize small-scale, interactive working lunches on asset structuring before, during and after the sale of a business. The emphasis is on exchanging tips, tricks and practical cases. You will have ample opportunity to engage in conversation with tax specialists, estate planners, private bankers and like-minded entrepreneurs. The lunches will take place at Delen Delen Private Bank on the Van Maasdijkstraat in Heerenveen, as well as in Amsterdam and Den Bosch. Register via delen.bank/entrepreneur.
