You’ve Just Sold Your Business for Millions. Now What?

Financial and life decisions often become more complex—not less—after selling your business. Here are ways to put your profits to work while enjoying the retirement you deserve.

We’ve helped many business owners develop a financial plan for their wealth after selling a business. It may seem paradoxical, but we’ve found that managing wealth after the sale is often more complex for these clients than while they’re running their businesses. They often have several million dollars to manage, and if a major mistake is madewhen entering retirement, there’s basically no time to fix it.

Some business owners don’t see it that way. They’re ready to ease off the gas and foresee part of their retirement devoted to overseeing their money. Recently, we had a client mention, “If I’m selling my business, why do I still need a financial advisor to help manage my affairs in retirement?”

On the surface, it’s a valid question. But for the first 10 years after selling a business or medical practice, many owners face some key financial decisions about healthcare, charitable giving and simply how to use their newfound freedom wisely.

In addition to providing sound financial advice, an advisor can act as a coach to help the new retiree enjoy their life. For those who are selling, here are a few options to consider.

Healthcare expenses

Many owners exit their business well before being eligible for Medicare at age 65. Prior to retiring, many clients have coverage either through a company-sponsored plan or through their spouse’s plan at another company. If they’re younger than 65, they won’t qualify for Medicare and need to seek insurance on the open market, which canoften cost tens of thousands of dollars annually for them and their spouse.

Working with a team of experts, including insurance brokers, a financial advisor can help them find comprehensive health insurance at an affordable price. For example, we worked with someone who’s beloved spouse had diabetes and other health concerns. As a result, the couple’s prescriptions were expensive, along with having specific doctors and hospitals providing the care they needed.

To find optimal care at the lowest cost, we connected them with a health insurance broker to analyze their options, making sure their medical benefits included the exact prescriptions and doctors required. After that, using their new medical plans, we were able to forecast the costs to project their potential retirement cash flows. They were entering retirement knowing that they’ll be able to continue receiving good care without needing to change providers.

Maximize income from the business sale

Many owners generate enough profit from the sale of their business to live off the cash for several years. And many have also accumulated a large amount of savings in their retirement accounts. One post-sale strategy that we have implemented often with business owners is the conversion of money in pre-tax accounts to Roth IRAs.

For example, if a business owner sells their practice for a substantial amount of money, which in turn allows them to live on the after-tax proceeds for a certain amount of time after the sale – the method of converting a portion of that money into Roth IRAs overtime, may help them accumulate an excess amount of money, and potentially extendtheir cash flow in retirement.

Set a strategy and involve family

As the stock market has soared, many business owners have seen their portfolios grow exponentially over the past 10 years, making them compelling vehicles for a long-term charitable giving strategy. Though this strategy may not be available to all business owners, it’s important to understand that there are restrictions and limitations with all strategies. Here’s an example of how this strategy can be utilized.

For many of our business owner clients, we have established a Donor-Advised Fund (DAF) in the year they soldtheir business. The DAF earmarks charitable contributions for several years. Using a strategy called “charitable bunching,” the owner makes a significant donation in the year their business is sold.

This donation—potentially in the hundreds of thousands of dollars—could be more beneficial during the year of sale because it offsets ordinary income taxes from the sale. For example, we had a client who would normally contribute $30,000 each year to nonprofits, and using a DAF could make a significant dent in their taxes by donating $300,000 within the first year after the sale.*

At the same time, this former owner began to also share their values with younger generations and provide importantlessons to them by involving their family in the charitable giving process. Every December, they allow each grandchild to allocate $1,000 from their DAF to a charity of their choice. Through this strategy, they’ve been able to spend quality time with the grandkids while leaving a legacy shaped by their ethics and love of family.

Don’t waste time and energy on the small stuff

Some new retirees, now looking to fill time in their day, aim to save money by doing their own taxes or managing their investments. They may initially see it as both easy and challenging while also saving some cash.

But it isn’t easy. To accomplish that goal, they need to keep up with the latest changes in tax law, an often-tediousand time-consuming affair. After spending a few hours trying to tackle this daunting task, most see the value in continuing to have an accountant handle it.

The same goes for investing—cutting corners to save a few bucks can have an impact on the longevity of their investment portfolio and the cash flow they’ll have available in retirement. A professional like a Corient Wealth Advisor is trained to deal with different economic and market conditions in order to maintain a viable investment strategy that’s personalized for each client’s unique circumstances.

Determine how to enjoy retirement

After working 40 years or more, it often takes many owners some time to shift from full-time work to retirement. It’s a significant change in thinking and lifestyle. A financial advisor can help them discover what the new chapter in their life will look like and how to spend their time (which often is their most limited resource—even more thanmoney) with the people and activities they love.

We recently encouraged a retiring dentist who sold his practice to also sell his large house and the building where his practice was located. Instead of spending time managing a large dwelling and a business property, he freed up time for his grandchildren and friends and improving his golf swing.

Having a good plan for managing your wealth in retirement can help a new retiree accomplish many goals—both financial and non-financial. And it can also provide an opportunity to show your family how your wealth can be used to help others. Instead of spending your retirement worrying about market volatility or the latest tax plans, use it instead to enjoy life. You’ve earned it!

 

*Charitable giving tax strategies are complex. The scenarios described herein are being provided for informational purposes and you should consult with your legal and tax professionals.


ABOUT THE AUTHOR

Jason Cross

Jason Cross

Partner, Wealth Advisor

Jason is a Partner, Wealth Advisor in our Atlanta office. Jason’s passion is developing comprehensive wealth plans and implementing ongoing financial planning strategies for his clients. He brings a unique perspective as a former trust officer and attorney. He concentrates on clients with complex needs, such as business owners and multigenerational family wealth.

Jason received his bachelor’s degree in finance and law from Goizueta Business School of Emory University, then earned his JD from Emory School of Law, where he focused on contract law, wealth transfer, and trusts and tax planning.

Jason is a CERTIFIED FINANCIAL PLANNER™ practitioner and has earned the Certified Trust and Financial Advisors certification from the American Bankers Association. He is a member of the Georgia Bar and the Estate Planning and Probate Section of the Atlanta Bar.

Jason and his wife, Alyssa, have three sons and reside in Charlotte, where he enjoys reading, strategic war games, chess, painting and strength training.




CONTENT DISCLOSURE

This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice.  This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy.  This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice.  We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.

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