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Financial Planning | Legacy Planning | Lifestyle
You have recently sold your business and are now looking ahead to the next phase of life, after what would have been a potentially long, but rewarding journey.
However, before you embark on your year-long charter across the globe, you should address and settle some important financial loose ends you may have overlooked.
#1: Revisit your financial plan
The first step is to ensure your sale proceeds are included in your overall financial plan. A cash injection from the sale of our business might have a considerable impact on your financial plans or goals, so take time to re-evaluate what is important to you and your family.
Here is where your wealth manager can help you make informed decisions regarding the long-term management of your sale proceeds and retirement assets.
Ideally, you should invest in a diversified mix of low-cost, tax-efficient assets that complement your overall portfolio and put you on the path to achieving your long-term goals.
Also, there is nothing wrong with spending some of the proceeds either doing ‘bucket list’ items whilst you might still be able to, supporting family, or donating to a charitable cause of your choice.
#2: Generate multiple income streams
After selling your business, you will have to manage the transition away from a salary and/or dividends to living off income derived from your investments and other assets.
Many individuals opt for different strategies to suit their needs and requirements. For example, you might opt for an income strategy that targets high yield or dividends, producing an appropriate level of income that means you do not need to use any of the capital.
Others might invest in different asset classes, such as property that will offer income in the form of rent, along with capital growth over the longer term.
It is especially important to build a tax-efficient monthly income stream to cover your living and lifestyle expenses. Striking a balance in your portfolio and making sure you have multiple streams of income can guarantee a long-term strategy for continued wealth.
#3: Familiarise yourself with possible tax consequences
When selling a company, your tax position must be taken into account. Almost all governing bodies in any jurisdiction require accounting for every asset sold with the business, and you should be able to categorise each asset as follows:
The tax you ultimately pay depends on whether the money you make from the sale is taxed as income or as a capital gain. With careful planning and a qualified tax professional, you can better understand your potential tax exposures and minimise your liabilities.
#4: Be proactive in taking out insurance
No matter what age you decide to sell your business, it is always the right time to take out a comprehensive life and critical insurance policy (if you do not already have one). Life is filled with uncertainties, and while no one likes to think about being diagnosed with a critical illness or condition, should it happen, it almost certainly comes with financial consequences.
As we get older, our focus moves from wealth accumulation to wealth preservation and how we can ensure that our family can inherit it fully. This is where a structured financial plan using insurance is valuable, allowing you peace of mind over what happens upon your death.
#5: Review your estate plan
Along with your financial plan, it is advisable to review your estate plan any time you experience a major life event, and selling your business is no exception.
More wealth is being passed down through generations now than ever before, and governments are ever ready to claim their share of the estate via death taxes. In some cases, this tax charge can be more than 40% of the value of estate assets transferred.
There is good news, however, and through appropriate planning, the death tax charge can be mitigated. Your estate administrator and estate planning attorney can help you review the following designations to determine if any updates are needed:
#6: Develop a “strategic” philanthropic plan
Many business owners often look for ways to give back to the causes that matter most to them after the sale of their business. When giving to charity is part of your financial plan, it's important to have an effective strategy.
Here are a few options you can use to maximise your impact whilst minimising your taxes:
You've worked hard to grow and manage your business, and you deserve to go out on your terms and achieve all your goals. While you focus on making the next phase of your life even more rewarding, you can also walk away knowing that you've done everything possible to keep your employees, customers, and family protected and planned for.
So, if you’ve already sold your business or are in the process of selling it, it is important to consider everything covered in this article (and more). To discover what else you may be missing out in your exit plan, collaborate with us.
Our team of accredited and experienced advisers, and other partner professionals, are all dedicated to helping you achieve your goals. If you need help with financial planning after selling your business, schedule a call with a member of our team.
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