Trust Perspective continued...

Here are my predictions: If President Obama is re-elected, I predict that the federal estate tax exemption will be lowered from the current level to the level that existed in 2009 which was $3.5 million although I believe there is a slight chance it will remain at the current level at just over $5 million. If Govenor Romney is elected on November 6, my prediction is that Congress will pass a one year extension of the Bush tax cuts to allow a new tax deal to be put together and the federal estate tax exemption will ultimately remain at the $5.1 million level and will be indexed for inflation. I am not a betting man so I will not put any money on these predictions!

One of the other things that was discussed at the Harl event was the importance of updating your estate plan and I strongly recommend that once the dust settles and Congress deals with the issues described in the preceding paragraph, you review your estate plan with your attorney and CPA. With respect to business succession planning, I would like to share some statistics that indicate that as a group, family businesses do not do a good job of dealing with issues related to transition of the business from generation to generation. Based upon the "Family to Family: Laird Norton Tyee Family Business Survey 2007":

• 60% of all majority shareholders in family businesses were age 55 or older in 2007 and nearly 30% were older than 65.
• Fewer than 30% of respondents have a written succession plan.
• Fewer than 40% have a successor in line and were preparing for transition.
• 64% of respondents did not require family members entering the business to have the qualifications or experience necessary to be successful.
• 25% of respondents said the next generation was not competent to move into a leadership position.
• 93% of respondents have little or no income diversification

Statistics show that most family owned businesses will fail in the transition from one generation to the next. Roughly 70% will fail in the transition from the first to the second generation. Of those that survive, 90% will fail in the transition to the third generation and of the few remaining, 96% will not make it to the fourth.

NOT PLANNING is a bad plan! My encouragement to you is that you take the steps to begin the process of transitioning your business to the next generation. It's never too early. We are always available to talk and help in the transition process so if you wish to explore this further, please give me a call at 641-422-1600.

Greg Nicholas