Case Study 6

Mapping an Exit Strategy for a Small Business Owner

George spent most of his adult life building a profitable public relations agency. But with his 60th birthday approaching, he wanted to explore wealth preservation strategies that would shore up his retirement and give his employees a more meaningful way to share in the agency’s success.

With the assistance of a SunTrust Private Wealth Management Client Advisor, George and his attorney created an employee stock ownership plan (ESOP), awarding the employees a 40 percent ownership stake in the company. On George’s behalf, the SunTrust team used the proceeds from the sale to purchase a well-diversified portfolio of U.S. stocks and bonds that fit the IRS’s definition of “qualified replacement properties.” Under this structure, George is not required to pay capital gains tax on the proceeds of his sale as long as he retains these securities.

There are many benefits to this wealth preservation strategy. It rewards George’s employees for their contributions and dedication, and further incentivizes employees by tying their own financial success more directly to the company’s performance. It provides George with a highly tax-advantaged way to liquidate his own shares. Best of all, it affords George and his wife the cash flow they need to maintain their lifestyle, set up college savings accounts for their two grandchildren and look forward to a comfortable retirement.

Disclaimers

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These materials are educational in nature. The implications and risks of a transaction may be different from individual to individual based upon past estate, gift and income tax strategies employed and each individual’s unique financial and familial circumstances and risk tolerances.

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