From Business Lexington Magazine, October Issue, By Susan Baniak
When it comes to business succession planning, the majority of family business owners are not prepared for what comes next for their company.
According to a report released by PricewaterhouseCoopers earlier this year, only one in four family-owned operations have a robust succession plan in place for the company’s next chapter, and almost half of those polled said they were reluctant to pass the business on to the next generation.
Understanding the legal intricacies of business succession plans can be daunting, said Jamie Traughber, partner at the newly formed firm Hargrove Traughber, but the tougher personal issues that many business owners may overlook can be far more problematic than the paperwork.
“A lot of business partners don’t consider, for example, whether they want to be in business with their partner’s spouse or if their spouse wants to work with their [business] partner,” Traughber said. “Part of what we need to address in the planning process is making sure all those contingencies are covered.”
Business succession planning is only one aspect of the law practice at Hargrove Traughber, a boutique firm that bills itself as one of the largest estate and trust practices in the Midwest. With offices in Louisville, Kentucky, and Brentwood, Tennessee, in addition to Lexington, the firm specializes in estate planning, probate, trust administration and related tax matters. Led by Traughber and veteran Kentucky attorney Jamie Hargrove, the office employs three attorneys and 10 staff members in total.
Hargrove, who has three decades of legal experience in Kentucky, previously served as a founding partner of Newberry, Hargrove & Rambicure, before that practice merged into Stoll Keenon Ogden in 2003. In 2011, he launched Hargrove Madden LLP with longtime business partner Roger Madden. He is also the co-author of the book “The End of Lawyers, Thank Goodness!: Estate Planning and the End of Inefficient Lawyers.”
Traughber, who earned his bachelor’s degree in history from the University of Kentucky and his J.D. from the University of Louisville’s Brandeis School of Law, previously served as a partner at Hargrove Madden, where he led the Elder Law and Special Needs practice. He was also formerly an estate, trust and tax attorney with Stoll Keenon Ogden.
Planning ahead for the smooth transfer of assets is important for all business owners, regardless of the size of the business, Traughber said, just as estate planning is not just a concern for those with the highest net worth.
“Typically, our clients are families; business owners; business professionals, including doctors and CPAs; and people who own real estate,” Traughber said. In Lexington, the firm’s client base has grown to include equine farm owners and horse trainers, as well.
While every client’s needs and objectives are different, Traughber said, it is important for everyone to have a plan in place — and to revisit that plan on a regular basis. Changes to the tax laws over the past five years have established federal estate and gift tax exemptions at more than $5 million, indexed to increase over time with inflation. The bigger exemptions, set at $5.49 million per individual for 2017, have meant that most clients are no longer as concerned about their estate tax burdens, Traughber said, but their planning still needs to address related income tax consequences.
Technology has also been leveraged to improve efficiencies in estate, trust and tax planning in recent years, Traughber said. Hargrove Madden was recognized for its success in streamlining the process through its use of an innovative online platform. In 2012, the firm received the American Bar Association’s eLawyering Award for the best online delivery of legal services in the nation. It spun off its online service for basic estate planning the same year to create the startup company NetLaw.
Bridging today’s technology gaps can be a challenge for estate planning firms in particular, as baby boomer clients prepare to transition their legacies to their increasingly tech-savvy heirs.
“Communications technology is changing continually,” Traughber said. “We have some clients who don’t do email and some who prefer to set up Skype meetings for their appointments.”
Traughber said his firm serves its clients in whatever way they find comfortable but also works to have the latest technology available for those who choose to use it.
The intricacies of estate, trust and tax law can sometimes sound like a foreign language to clients, he added. For some, an estate-planning lawyer may be the only legal advisor that they work with on a regular basis, and although his firm is specialized, he and his counterparts are often called upon for consultations and referrals for a wide variety of legal matters. The firm also offers informational guidance and industry updates through the blog on its website, htestatelaw.com.
“We like to be a resource for the community,” Traughber said.
The firm is currently exploring opportunities for expansion into additional major markets, either through partnerships or the establishment of new offices. Cities that have been under possible consideration include Pittsburgh, Indianapolis and St. Louis.
Hargrove Traughber’s Lexington office is located at 444 E. Main St., Suite 201.