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CEPA Term - Session 1 Questions and Answers
What are the 5 stages of the Value Maturity Index (IPBHM)? o :## 1. Identify o 2. Protect o 3. Build o 4. Harvest o 5. Manage What are the 5 Leadership Concepts of the Value Acceleration Methodology? o :## 5 - Value Maturity Index 4 - Intangible Capitals 3 - Legs of the Stool 2 - Concurrent Paths 1 - Goal = Value What are the 4 Intangible Capitals? o :## 1 - Human 2 - Structural 3 - Customer 4 - Social
What are the 3 legs of the stool of a successful exit strategy? o :## 1 - Personal (planning for what comes next) 2 - Financial (ensuring owner is financially prepared) 3 - Business (maximizing transferrable value) What are the 2 concurrent paths regarding leadership in the Value Acceleration Methodology? o :## Personal and Business What is the one goal of the Value Acceleration Methodology? o :## 1 Goal = Value! True or False - Exit Planning is good business strategy o :## True! What is exit planning? o :## An exit plan asks and answers all the business, personal, financial, legal and tax questions involved in transitioning a privately owned business. It includes contingencies for illness, burnout, divorce, and death.
What are the three gates of Value Acceleration Methodology? o :## Discover, Prepare, Decide What is a Deliverable? o :## • An outcome produced by an action.
- A report, meeting, workshop, event that represents the conclusion of an assignment, step, stage, task or action.
- It represents what the client is paying for.
- It is important that the deliverable leads the client to the next stage of work. •Therefore, it should recommend the next stage, steps, action that the client should take, the resources needed, and tee up your next assignment. What are "90-DAY SPRINTS" o :## A continual loop of prioritizing, executing, measuring, reconnecting, and recalibrating every 90 days. What is a Triggering Event? o :## An independent personal, financial, and business assessment correlated to business range of value. What are the 4 areas of Wealth Management?
o :## Retirement Planning, Portfolio Management, Risk Management, Estate Planning What is a Wealth Gap? o :## The difference between our net worth and desired goal. What is the "rule of 4" when it comes to determining a Wealth Gap? o :## Whatever the balance of an account is, we can take 4% per year and that account will last us the rest of our lives. If I had $10M with a 4% return, that gives me income of $400K per year. What is a buy-sell agreement? o :## A buy and sell agreement controls the reassignment of a share of a business in the event that a partner dies or retires. A buy-sell agreement provides for the stability and continuity of a closely held business and is a crucial part of a business owner's overall succession and estate plan. The typical business owner has ____% of their net worth tied up within their business. o :## 80% Benefits of Wealth Management Include:
o :## An ILIT is a type of irrevocable trust that typically is used to own life insurance policies on your life. Instead of you owning the policy and naming your family members as the beneficiaries, the ILIT will own the policy and the beneficiary will be the ILIT itself. At a future date, the ILIT will collect the death benefits upon your passing, repay any loans, and distribute the money according to the terms of the ILIT. A strategy which makes assets difficult or impossible to reach is called: o :## Asset Protection Assets that may be gifted include: o :## Cash, Marketable Securities, Illiquid Assets, Insurance Policies, Income generating accounts (IRA, 401k, PSP, etc), Artwork What 5 tools are used for Asset Protection? o :## • Insurance •Legal Documents •Asset Placement •Jurisdiction •Beneficiary Trusts: Retirement, LTPT, SNTs Describe the Asset Protection Continuum
o :## The Asset Protection Continuum encompasses many areas of asset protection, varying strategies that are employed over time. Not a "one and done" operation; it's an ongoing process. What are the benefits of an Intermediated Installment Sale Trust (IIST)? o :## • The IIST can defer capital gains taxes on the sale of almost any type of highly appreciated asset including: o Businesses & professional practices o Commercial real estate o Investment properties o High end primary residences o Major private stock positions o Valuable artwork and collectibles
- With the IIST, you can invest back into real estate or a business!
- Client only pays income tax at ordinary rates when payments from the trust are actually received as long as the original balance remains untouched. If a business owner dies, their assets often go through three "gates." Family, the IRS, and ____. o :## Charity
Name the 8 available Charitable Giving Vehicles o :## 1 Outright Charitable Gifts 2 Revocable Living Trusts 3 Pooled Income Fund 4 Charitable Gift Annuity 5 Private Foundation/Supporting Organizations 6 Donor Advised Funds (DAFs) 7 Charitable Remainder Trusts (CRUTs/CRATs 8 Charitable Lead Trusts (CLUTs/CLATs/Testamentary Charitable Lead Trusts) How does a Charitable Remainder Trust work? o :## In a charitable remainder trust:
- A donor transfers property, cash or other assets into an irrevocable trust
- The trust's basis in the transferred assets is carryover basis, which is the same basis that it would be in the hands of the donor, for assets transferred to the trust during the lifetime of the donor
- The trust pays income to at least 1 living beneficiary
- The payments continue for a specific term of up to 20 years or the life of 1 or more beneficiaries
- At the end of the payment term, the remainder of the trust passes to 1 or more qualified U.S. charitable organizations
- The remainder donated to charity must be at least 10% of the initial net fair market value of all property placed in the trust
- Charitable remainder trusts are irrevocable. Assets that go in can't be taken back. What are 4 reasons to create a Charitable Remainder Trust (CRAT/CRUT)? o :## - Help you plan major donations to charities you support
- Provide a predictable income for life or over a specific time period
- Allow you to defer income taxes on the sale of assets transferred to the trust
- May allow you a partial charitable deduction based on the value of the charitable interest in the trust How does a Charitable Lead Trust (CLAT or TCLAT) work? o :## 1. Make a contribution to fund the trust.
- Payments are sent to the charity.
- After the specified trust term, the remaining charitable lead trust assets are distributed back to original donor or heirs What are the two most highly valued gifts made to charitable organizations? o :## Business or business stock and real estate What percent of entrepreneurs donate money to charities?
According to the 2013 EPI State of Owner Readiness survey, ______% of owners have no written transition plan. o :## 79 - 83% (4/5ths) of owners have no written transition plan. According to the 2013 EPI State of Owner Readiness survey, ______% of owners have done no planning at all. o :## 49% of owners have done no planning at all. According to the 2013 EPI State of Owner Readiness survey, ______% of owners have no written personal third-act plan. o :## 94% of owners have no written personal third-act plan. According to the 2013 EPI State of Owner Readiness survey, ______% of owners are not familiar with all exit options. o :## 66% of owners are not familiar with all exit options. According to the 2013 EPI State of Owner Readiness survey, ______% of owners have no formal transition advisory team. o :## 78% (about 3/4ths) of owners have no formal transition advisory team. What % of business exits are caused by one of the 5 "D"s?
o :## 50% What % of family-owned businesses transition to the second generation? o :## Only 30% of family-owned businesses transition to the second generation Approximately ______% of businesses that are put on the market do not sell. o :## 80% of businesses that are put on the market do not sell Regarding Readiness and Attractiveness score averages: the midpoint of scores is ________%, but target is ________%. o :## - Midpoint is 58%
- Target is 67% (realistic) Know these US Market Statistics: A) ____________ US companies ($5M-$100M in sales) will try to exit by 2030 B) ____________ will be deemed 'market ready' C) ____________will transact D) ____________will sell with concessions E) ____________ will sell at desired value o :## A) 250,000 US companies ($5M-$100M in sales) will try to exit by 2030 B) 50,000 will be deemed 'market ready' C) 30,000 will transact
