Survey: Estate Planning Lags At Some Family Businesses

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Results of a new survey suggest that many large family businesses will have trouble meeting their estate-planning goals.

The researchers who conducted the survey, which was sponsored by Massachusetts Mutual Life Insurance Company, Springfield, Mass., and the George and Robin Raymond Family Business Institute, Alfred, N.Y., received responses from about 1,000 well-established, family-owned businesses with annual revenue of at least $1 million.

Although the companies had mean annual revenues of $36 million and most chief executives hope to retain family ownership, 55% of chief executives over age 60 who are expected to retire within five years have not chosen a successor.

Nineteen percent of the respondents say they have not done any estate planning other than preparing wills.

Forty-eight percent of the respondents want to use life insurance as their top source of funds to pay death taxes, but that might be unrealistic, because 55% say their companies fail to conduct the regular, formal valuations of company share value needed to forecast estate taxes.

The researchers also found a lack of use of common estate-planning vehicles. Only 50% of the respondents regularly use their annual gift exclusion, and 22% say they use generation-skipping trusts.

The lack of emphasis on life insurance, gift-tax exclusions and trusts may be due in part to “how advisors get in the door,” says Joseph Astrachan, director of the Cox Family Enterprise Center at Kennesaw State University in Kennesaw, Ga.

Forty-one percent of the respondents named accountants as their most trusted estate-planning advisors, and 38% named lawyers. The number who named advisors with insurance-based professional qualifications was much smaller, Astrachan says.

Owners of family businesses tell Astrachan that they believe insurance agents and related advisors are far more interested in selling products than in providing impartial advice.

But Carol Wittemeyer, president of the Raymond Institute, says she thinks the typical family business has done better estate planning than some of the statistics indicate.

“Family business owners tend to think for the long-term,” Wittemeyer says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, January 27, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.