MM M&A 015 - How to Prepare for Wealth and Preserve Your Family Legacy

In this episode, Jeff Guylay focuses on the best practices to maximize after-tax proceeds from a transaction. Jeff is joined by featured guest Raj Rathi, co-founder of Rathi Singh Private Wealth Management, to share his insights from helping his clients understand the nuances of how best to manage their wealth.
Jeff and Raj discuss the importance of diligently working to articulate one's long-term personal and financial goals and utilize the wealth created in a transaction to achieve those goals.
Key takeaways from this episode are:
• Planning matters; and the sooner business owners start thinking about these important topics, the better
• Assembling a complete team, spearheaded by a trusted private wealth advisor, can materially improve the odds of achieving business owners' lifelong goals post-transaction through wealth preservation
In this episode, Colonnade Advisors addresses the following questions as related to maximizing wealth created in a transaction:
Why and how did Raj make the transition from working with corporate clients to wealth management? (02:24)
Raj: "My corporate life tended to be transactional, where I would have wonderful client relationships, but sometimes those relationships tend to fade after the transaction has transpired. I realized that I liked to keep those relationships, and I liked to have those flourish a little longer. Also, there is an incredible opportunity for my personal clients to get the value-added services from somebody that can look at their situation from a much broader perspective."

"Corporate clients have the benefit of an M&A advisor giving them expert advice on how to navigate every nuance of a transaction. Private clients don't get that same type of benefit. They tend to do things by themselves. There is a tremendous amount of inefficiency that exists in the way private clients manage their assets."

"Part of the reason for my transition was the opportunity to work with corporate clients on an individual basis and help them, as a trusted advisor, on the private side. To help them figure out the most efficient structure regarding what happens with their wealth after they sell their business."

When should business owners start thinking about post-transaction wealth management structures? (08:35)
Raj: The best structures tend to be implemented before a transaction takes place. Colonnade, as a sell-side advisor, is incredibly value-added. You focus on maximizing your clients' pretax return on a sale and also try to highlight that there is a maximization that happens after the sale with the estate taxes and structure."

"No client has a crystal ball on exactly when they may sell a business. The best advice is pre-planning never hurts because you don't know when exactly the sale is going to occur."

Can business owners work in parallel with an M&A advisor on a sale transaction and a private wealth advisor on post-transaction wealth management? (10:50)
Raj: Yes, it can run on a parallel path, but it takes a little bit of work. Business owners will need a good banking team to assist on the actual M&A execution and have a good private banking team that can work with the estate attorney or other key advisors. The critical component here is the more time you have, the better, and if you don't have a lot of time, there are still things that can be done that are quite valuable."

Why is it important to consider post-transaction wealth management before a transaction takes place? (12:18)
Raj: "Knowing how much of the transaction proceeds you will need for your lifespan, how much of the proceeds you want to give to your children, and to charity, in advance, will allow private wealth advisors more time to research the best approach."

"Protecting your kids from creditors or predators can be done pre-transaction, harder to do post-transaction, not impossible but a little bit harder."

"With the right structure, the estate tax bill can be alleviated into perpetuity. These are the kinds of things that are better addressed ahead of a transaction."

Who is typically involved in the private wealth management team? (14:41)
Raj: "Private wealth advisor, accountant, estate planning attorney, and tax advisor."

Are there structures to minimize capital gains tax on the transaction proceeds? (18:04)
Raj: "Sellers should plan on how much they need in their lifespan. Then plan the amount for gifting to children, grandchildren, or charity. We can use gift structures that are right down the middle of the fairway with what is permissible by the IRS, etc. Sellers would need to check with their tax advisor and the estate planning attorneys, but there are many proven structures."

"Marrying what we do on an after-tax basis with what M&A advisors do on a pretax basis can be a home run. With proper structuring, the assets are protected from