After the Deal Closes: A Framework for Purposeful Post-Sale Planning

The time leading up to the sale of a business can be both exciting and exhausting as years – sometimes even decades – of sustained effort come together in one final push. Often, this period involves a focus on what we refer to as “pre-liquidity planning,” where interests in the business may be sold or gifted to different types of irrevocable trusts prior to the sale. Because pre-liquidity planning can provide both significant transfer tax savings and thoughtful capital gain management, it gets a lot of attention (see “Pre-Sale Considerations for Business Owners and Their Families” by Kadeidra Honey-Brooks and Zach Gering). However, planning for the period after the sale, when the dust has settled and the proceeds have landed in your account, may be even more important and is often overlooked.

There is no magical switch that turns you into a less-driven version of yourself upon close. The energy, ingenuity, and grit that powered you through years of building your business and the final sprint to the sale do not vanish overnight. If you have decided that this sale was your last “bite of the apple,” once you take that long-delayed vacation and catch up on some sleep, you will need to turn your focus to an even bigger, longer-term project – finding purpose and fulfillment outside of building and running a business.

Business owners who thrive post-sale bring the same energy that made them successful in business to this new chapter of their lives. Below are a few insights into potential projects and initiatives that may help ease the transition into post-sale life.

Replacing Infrastructure

For many business owners, there is little division between their work and personal lives. In some cases, this integration means that many of the daily tasks involved in maintaining their lifestyle – bill pay, accounting, legal services, healthcare management, travel arrangements, etc. – have historically been run through the business. Following the sale, managing these elements alone may feel overwhelming.

Business owners who relied heavily on the business for lifestyle management may wish to explore working with a concierge service to help recreate this infrastructure for their personal lives. A lifestyle concierge can assist with the management of many day-to-day administrative responsibilities, including bill pay and travel arrangements, and provide a glide path into post-sale life. If you would like to learn more about lifestyle concierge services at Wealthspire, your advisor can connect you with resources that specialize in assisting individuals and families with these needs.

Some families may also wish to consider establishing a single-family office (often abbreviated to “SFO”). A SFO is a private family business designed to manage and preserve the wealth of family clients. SFOs manage investments and offer financial and investment advisory services to family clients and may also provide administrative and lifestyle management services. The SFO structure may also offer certain tax efficiencies as well as provide a structure for family governance. Effectively, the SFO is a new company, and its line of business is managing family wealth. The Family Office Services team at Wealthspire can help interested families explore whether an SFO may be a fit for their unique circumstances.

Self-Knowledge

In addition to a number of immediate and practical changes, the period following the sale of your business can be a time of significant emotional transition. For many years, being a business owner consumed much of your time and attention and may have been a cornerstone of both how you were viewed in your community and how you thought of yourself. It’s important to take some time to reflect on who you are separate from your identity as a business owner. Just as you may have worked with a consultant in pursuit of process improvement for your business, it may be helpful to work with a professional as you navigate this new phase. Spending time with an executive coach or other trusted advisor to discuss next steps may lay the groundwork for a happier, more productive, and more engaged way of planning for your future.

Personal Projects

This is an exciting time to devote your full attention to the personal and family projects you have always wanted to pursue. You can review your estate plan to make sure it reflects your goals and intentions. Consider moving forward with additional wealth transfer strategies or work with your advisor to craft an agenda for a family meeting. You can research and create a family narrative to share with your children and grandchildren. You can take a class on a subject that has always interested you or organize a trip to a place you’ve longed to visit. For the first time in many years, you have the time.

Community Engagement

The post-sale period presents an excellent opportunity to become more involved with your community and the causes closest to your heart. If you enjoy connecting with large groups, your experiences as a business owner may make you an insightful guest speaker for the business program at a local college or university. Similarly, this background would make you an excellent mentor for students and aspiring entrepreneurs. Contacting your alumni organization or a local business association can be a great place to start exploring these opportunities.

If you want to disconnect more completely from your working life, you can volunteer at your place of worship, shelve books at the library, join the docent program at a local museum, or become a “room parent” at a child or grandchild’s school. Your time and attention will be deeply appreciated.

Closer to home, don’t be afraid to be the first to reach out to your friends and former colleagues to touch base. You now have the flexibility to schedule a monthly lunch or tee time with the confidence that you’ll actually be able to join. This period can be an excellent time to reconnect with those you missed during the frenetic period leading up to the sale.

Philanthropy

You may wish to pair greater engagement with your community with thoughtful charitable giving. Many business owners report giving “here and there” in response to direct requests or when moved by a specific event or social issue, but few have a dedicated and organized approach to philanthropy. Now that you have the bandwidth to take on new projects, you may wish to build some structure around your giving. In addition to providing a charitable income tax deduction, philanthropy can help bring your family together around your shared values. One common way to begin to formalize your giving is by creating and funding a donor advised fund, or “DAF.”

A DAF is a charitable planning account that is treated like a public charity for tax purposes. The owner of the account receives an immediate charitable income tax deduction for contributions to the account. A DAF does not have a minimum annual distribution, so the owner of the account may make grants from the account to charitable organizations of their choice at any time, and these grants may be made anonymously to allow the family to preserve their privacy. The timeframe to create a DAF is very short, often a matter of days.

Following the funding of your DAF, you can bring your family together to share your charitable goals and discuss potential grantees. It is not uncommon for families to make grantmaking part of their holiday celebration each year. As part of this process, you may wish to create a philanthropic mission statement to guide your giving as a family. When you die, you can name one or more of your children to succeed you as grant maker and continue your family’s tradition of giving.

While a DAF is an excellent solution for most families, if you have a desire to leave a public legacy of philanthropy, an interest in broader grantmaking and a desire to hire family members to help manage your family’s giving, you may wish to consider creating a private foundation. It is important to note, however, that creating and maintaining a private foundation will entail considerably more time, expense, and oversight than a DAF. If you think a private foundation may be consistent with your goals, your advisor can connect you with a member of the Wealthspire Family Wealth team to discuss the advantages and disadvantages of this strategy in more detail.

Finally, as part of the process of building some structure around your charitable giving, you may wish to review the beneficiary designations for your retirement assets. After the SECURE Act eliminated the “stretch” IRA for most beneficiaries, retirement assets are no longer quite as desirable as inheritance assets for beneficiaries other than your spouse. If you are comfortable with the provisions that you’ve already made for your children and you have philanthropic goals, it may make sense to consider naming a charitable organization as contingent beneficiary of these accounts after your spouse.

While it’s easy to get caught up in the rush of pre-sale planning, devoting some time and attention to life after the sale can help you truly enjoy the fruits of all your hard work. If you’d like to discuss your post-sale strategy, reach out to your team at Wealthspire.