This chapter discusses strategies to help family businesses and their owners deal with liquidity problems. Although the federal estate tax imposed on the death of a majority family business owner was probably the most common cause of a liquidity crisis, the estate tax has never been the sole cause of a crisis, and is now a less common liquidity threat for smaller family businesses. Unexpected events like recessions, increased competition, technological changes, and even interest rate spikes can all trigger a cash flow crisis. Planned expansions and scheduled loan balloon payments can also create a cash flow crisis. The chapter discusses the place of insurance planning in a liquidity analysis. The tax code provides relief measures including extensions to pay estate tax, and estate plans can be designed to minimize liquidity problems. The chapter details these techniques which are typically unavailable without advance planning or a redeploying of business or family assets.
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