Entrepreneurs are busy. Often too busy for their own good or at least the good of their legacy. You are likely very involved in your balance sheet and P&L, but yes estate planning?

Procrastination in estate planning can become a hidden cost for successful entrepreneurs, and the solution is available to you, no matter how young you or your company is today.

If you've seen the musical “Rent,” you'll likely sing along to the oh-so-memorable “Season of Love” that reminds us there are 525,600 minutes a year. Every minute counts when you have a worthwhile business. Think of drag cost as a measure of growth property tax liability which can become a liability on your family and a liability that affects your ability to leave a legacy.

To put that in perspective, assume a net worth of $50 million that grows at 7.2%. The additional property tax over ten years is approximately $20 million. This translates into an increased liability of $166,667 per month on average. A net worth of $100 million becomes $333,334 per month. Mark, mark, mark…

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The hidden liability that is wealth tax

The problem for business owners, in particular, is that the estate tax can be a “hidden liability,” since it's a liability that the family pays directly in cash to the IRS when you're gone. We call it hidden because this obligation has a date and many unknowns.

If you are the CFO of your lender or an insurer, the liability can be hidden because it is a wealth and family planning issue versus a direct company liability. But if most of your net income is tied up in business or other illiquid assets such as real estate, it is no longer written off when millions of dollars come due. Thus, tick-tock, tick-tock, tick-tock becomes “BOOM!”

For a private business owner, how this is handled can mean the difference between winning and maintaining a competitive advantage for your business and your heirs and losing it.

For example, for a business owner with a net worth of $75 million today, you would need to answer: How do you pay $20 million in taxes in cash to the IRS and still compete in your industry segment? No business owner wants to sell their business to pay their estate tax liability.

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The right position for a zero estate tax plan

Conversely, proper planning and positioning can actually provide an opportunity to improve your long-term competitive position. Wealth tax is the only “voluntary tax” you get. You may know it as a “zero estate tax plan” – and in relation to your competitors who may not have a strong plan, it can be a strategy to position your business for lasting success.

By the way, if you are over 55, the cost of “funding” the problem with life insurance is not feasible. The cost of insurance becomes prohibitively expensive every year, or worse, it may become unavailable to you due to health issues that may affect your ability to secure adequate coverage.

Know and avoid this worst case scenario

If you need an extra incentive to consider your estate tax plan now, even if you're not over 55 and in excellent health, consider the impact your sudden death could have on your estate based on time alone.

We know that most industries – and the companies that make up an industry – go through significant business and economic cycles, usually every 4-6 years. Imagine a scenario where the business owner dies at the peak of the business cycle, which determines the amount due as an estate tax.

Because the estate is tied up in an illiquid asset (the business), it takes several months to several years to sell the company to pay the estate taxes. Unfortunately, a business cycle downturn immediately following the death drags the business value south. Essentially, the untimely death of the business owner positioned the otherwise healthy business for a fire sale simply to pay estate taxes.

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Strategically plan your beneficiaries to eliminate the estate tax

In my business, we like to say there are only three beneficiaries when it comes to your estate: the IRS, family and charity. Potentially, your employees could become the fourth beneficiary, but again, without a plan, this is an unlikely outcome. Thus, “planning” the problem becomes the most effective way to minimize or eliminate the consequences of wealth tax.

It is possible to strategically position your wealth and redirect it IRS estate tax for other beneficiaries. Instead of 60% family and 40% IRS, a good plan can make it closer to 75% family and 25% with charity or other beneficiaries.

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Create a SMART plan to maintain family harmony

Have you ever heard someone complain, “My parents built a great business, but my brother ran it into the ground.” The reality was likely that the brother could not overcome paying the IRS approximately 50% of the value of the business to the IRS while struggling to keep the business competitive. So it's not just money that stings because of poor planning; the risk of conflict and litigation between family members may occur. Business continuity and estate planning work must be done to create an efficient and harmonious transition. Is one SMART (Ss MA orn.d Reducate Tensions) wealth transition plan.

There is an urgency associated with this task beyond premature events. The impending expiration of the current estate tax laws at the end of 2025 will exacerbate the burden. You have a good time horizon to work with if you start now and devote a few hours to converting a growing property tax liability into a multi-generational asset for your family and community. Start by asking your colleagues or advisors for their perspectives and who you can invite onto your team to help you create a plan that sets you and your legacy up for success.