Planning your legacy in 2018

2017 is rapidly coming to an end. In just a few days we will turn the page on our calendar and start 2018. A new year, a new set of opportunities, a new set of challenges. But no matter what, none of us can stop the relentless march of time.

It is fitting that as we close out one year we remember those most important to us. In many traditions that includes holiday gift giving: Christmas, Hanukkah, and Kwanza are three commonly celebrated in the United States. These gifts can be lasting legacies for many years or even generations in some instances.

But it is not only the calendar that drives legacy. Legacy can also be driven by life changes. For some business owners, this includes the ownership transition of their business as they move into retirement. What legacy do they want to leave at this important juncture?

For many business owners that legacy may include:

  • Preserving local jobs
  • Maintaining the independence of the company they built
  • Continuing community outreach and giving

But how can they liquidate ownership interest while working towards those goals? Over 7,000 companies have used an Employee Stock Ownership Plan (ESOP) as part of their ownership transition1. An ESOP is a qualified retirement plan that is invested primarily in the stock of the sponsoring company. The shares are owned by the retirement plan for the benefit of the participating employees.

Because the beneficial owners are the employees, ESOP owned companies are less likely to be sold or move their operations. It is important to note that there is nothing that prohibits an ESOP owned company from doing anything other companies can do. It is just less likely.

In most instances employees do not contribute to the ESOP – it is an employer provided benefit. This can be one of the greatest benefits that many business owners can give to their employees.

The start of the year is a great opportunity to plan for the succession of your business and the legacy you want to leave.

In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Follow @twitter 


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The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.