Business owners say they're focused on creating new jobs; however, they're not doing enough when it comes to business planning, which could unintentionally hurt their businesses, according to the 2012 U.S. Trust Insights on Wealth and Worth Survey.
“Some of the most successful business owners and entrepreneurs in history have been driven by a desire to change the world and improve the lives of others,” says Keith T. Banks, president of U.S. Trust. “The country was founded on that spirit of entrepreneurism, and it is a tremendous engine of economic growth and prosperity. Yet many business owners are so caught up in what they are doing that they often don’t envision a world without them in it. By not anticipating risks or a change in circumstances, they unintentionally may put the financial security of their families and employees at risk despite their best intentions.”
Seventy-two percent of respondents report that they are responsible for creating jobs while 76 percent of respondents say they are obligated to keep their workers employed regardless of how it affects profits. Another 66 percent of respondents say their abilities take create opportunities for others makes them feel empowered, which is twice as many people as nonbusiness owners. Since 2008, 55 percent of respondents report that they have started, acquired or made major investments in an effort to grow their businesses.
Among the respondents, 55 percent say they do not have a formal succession plan ready, and 43 percent of those respondents are past age 67. Sixty percent of respondents say they also do not have a comprehensive estate plan, and they are even slightly less likely than nonbusiness owners to have basic protections, such as a will, health care proxy or a named durable power of attorney.
One-third of respondents report having an established life insurance trust, and 77 percent of respondents believe leaving a financial inheritance to their children or grandchildren is important. In fact, 46 percent of respondents have already transferred assets to establish trusts.
Still, 48 percent of respondents say they have not set up any trusts to protect or transfer their financial assets to their heirs, businesses or charitable beneficiaries. According to 42 percent of respondents, they have not done so simply because they haven’t gotten around to it while one-third of respondents say they do not think trusts are necessary as wills are enough.
“The business is often the primary source of wealth and income for the family, and financial responsibilities and risks often extend well beyond immediate family members to include parents, grandparents and siblings,” Banks says. “The modern American family comes in all shapes and sizes, and managing the dynamics of extended, blended and single-parent families or any special health, financial and emotional circumstances can have a big impact on planning needs.”
The survey also finds that 51 percent of respondents say they believe they are financially responsible for family members who are not as fortunate, and because of this, being financially independent is a top priority, particularly among those who have family with health issues that could necessitate long-term care. Despite this, approximately four in 10 respondents say they lack financial plans to take care of long-term care costs, and only 40 percent of respondents have long-term care insurance.