Daniel Chung of Mass Mutual was back with us for another great segment of information for our listeners. On this show, Daniel shared with Harvey the idea that “Businesses have a difficult time surviving generational changes.” What this means is that in the second generation, you have a 30% chance to go to the next generation in family owned businesses, in the third generation you have only a 12% chance, while for the fourth generation it plummets even further to a mere 3% chance. Daniel emphasized that without proper planning, it’s hard to move a family business or closely held corporation to the next generation. It is getting harder to pass a business down and the best way to ensure proper succession planning is to have all the generations at the table.
The generations that Daniel refers to are:
The Traditionalists – those born before 1946
Baby Boomers – those born before 1964
Generation X – those born before 1980
Millennials – those born before 1995
Daniel also talked about IBETE that stands for Income, Business Loans, Employees, Transfers and Estate Planning which are the 5 crucial elements to protect and preparing for succession.
Shelley inquired about what happens when an owner passes away and if a business loan can be called due. Daniel explained that in 2008 the banks personally guaranteed those loans so if something happens to the business owner and they have a personal guarantee on it, the family members becomes responsible for those loans and they are not prepared for it, it can really hurt the next generation.
Daniel always provides such great information on estate planning for both businesses and individuals and we love having him join us on air. As always, if you have any questions about financial planning, Daniel is happy to talk with you and help you make the best decisions for you and your family.
Please tune in every Sunday on KDWN AM 720 at 4pm to listen to our latest show. You can also subscribe to our YouTube channel to watch this video along with all the others.