ESOPs as an Estate Planning Vehicle For Business Owners

Hisrchfeld, Christopher C.
November 2002
Journal of Financial Planning;Nov2002, Vol. 15 Issue 11, p92
Academic Journal
This article examines the operations of an employee stock ownership plan (ESOP) and its potential benefits and disadvantages for business owners facing estate and other business succession planning issues. As demonstrated. ESOP offer several benefits in the area of business estate and succession planning. They also can provide an effective corporate finance strategy for resolving litigation matters such as shareholder disputes and divorces. The diversification benefits is a common issue with many business owners. The potential tax advantages to the owner selling his or her shares make it even more attractive. One should not forget the long-term benefits to the other stakeholders. ESOP can create an ownership mentality among their participants. Ownership incentives allow participants to benefit from their initiative. In many instances, ESOP allow companies to remain local and continue to benefit their communities. Such unique benefits to business owners and employees make ESOP a necessary arrow in the quiver of a financial planner. As with all planning techniques, ESOP may not be appropriate in many situations. But as business owners continue to struggle with succession planning or estate planning hurdles, an ESOP may be a viable option.


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