WOMEN IN BUSINESS: Financial planning for women

Much has been written about estate and financial planning for individuals in general. Do women have different goals and issues that should be explored?

Consider the following facts:

· Women live five to seven years longer than men.

· Women earn, on average, 74 percent of their male counterparts.

· Women opt out of contribution pension plans and deferred savings plans, if married, because of the need for current income.

· Women have, on average, smaller pensions and social security benefits due to career interruptions for child birth and rearing and elder parent care.

These factors must be examined together with the following concerns:

· Many marriages today end in divorce, creating a generally lower economic standard for women, with a higher economic burden. This results in decreased opportunities for savings and lower social security and pension benefits.

· Widowhood forces estate and financial planning upon the unprepared.

Taking these factors into account, it is clear that women today must begin making concrete financial, retirement and estate planning decisions and be active, educated participants in their implementation. The odds are that in the long run, they will be the ones to bear the burden of the results of the financial, retirement and estate planning selections made, or the lack of such planning and selections.

The importance of implementing these goals is amplified when we consider the number of women who now have entered professions and are in business:

· The Small Business Administration reports that women owned 6.4 million businesses nationwide in 1992. It projected that by the end of 1996, they would own eight million businesses–fully one-third of all businesses. Home-based small businesses owned by women support employment of 14 million people.

This illustrates the impact of women in the business community. It also highlights the fact that women must recognize the need for sound business and financial planning. Once in business, estate planning considerations must broaden to cover issues involving the fact that the business is a significant element of the estate and that the loss of income will significantly affect the business and family. Issues such as valuation, continuation of the business (succession planning), and providing for the payment of estate taxes all impact the woman entrepreneur.

During the start-up phase of a small business, least important in the mind of the entrepreneur are such goals and considerations. But the following issues are important to examine:

· Disability:

How shall the financial responsibilities of the business, the owner and her family be handled in the event of a disability which prevents the entrepreneur from working?

Who would manage the business during a period of disability?

Who would buy out the owner or how would the business be liquidated if the disability were permanent?

· Retirement:

Should the business be sold at retirement? If so, to whom and for how much? How would the owner be paid?

If the business is retained, who will run it? What provisions have been made for a successor and her training?

Have retirement or benefit plans been established that will benefit the owner and key employees?

· Death/Estate Plan:

Would the company be inherited? If so, by whom?

Would estate taxes force the family to sell the business?

Can a partner(s) or a designated successor buy the decedent’s share of the business? For what valuation? Is a funding mechanism in place for this?

Should the business be sold? If so, is there a ready market?

It is clear that women have a variety of considerations when analyzing their financial, retirement and estate planning goals. Whether reviewing options as an employee or as the owner of a business, women have an increasing number of factors to evaluate and act upon for the success of their business and the realization of their personal financial goals.

Linda E. Wasielewski is an attorney practicing on Old Mission Peninsula, Traverse City. Her practice focuses on estate planning, business planning and probate matters. (Illustration by Tim Barrons.)