Age: Late 40s
Citizenship: Korea (U.S. Resident)
Net Worth: $35,000,000
Jung-Soo, a Korean expatriate, has been living in California for 25 years. He and his American business partner own a small software company that has just secured a major contract with the U.S. military. To ensure delivery and meet compliance requirements, they need to hire a number of new executives.
Jung-Soo’s wife is Korean-American; their two sons have dual citizenship. His older son is studying engineering in Korea. He is engaged to a Korean national and plans to remain in Korea. Jung-Soo’s younger son is in a pre-med program in the U.S. Jung-Soo is also financially responsible for his widowed sister in Korea, who is in poor health, her son and her daughter.
Jung-Soo turned to his corporate attorney because he is concerned about his sister’s family. He is not sure how to provide for her and her family if something happened to him. He owns some property and a stock portfolio in Korea that he inherited from an uncle. Perhaps he should split it between her and his son who now lives in Korea? He doesn’t really like the idea but he doesn’t know what else to do. Besides it leaves out his other son who’s in the U.S.
As the attorney was unfamiliar with cross-border financial issues and planning opportunities,
he arranged a meeting between The Pacific Bridge Compannies (TPBC) and Jung-Soo. The meeting revealed a number of additional concerns that Jung-Soo realized he had been putting off.
TPBC scheduled a more extensive Ohana Methodology with Jung-Soo. Together they explored and prioritized Jung-Soo’s outstanding financial issues:
- Jung-Soo realizes his will is seriously out of date. When his father died, he left no instructions regarding his estate. It took Jung-Soo and his sister years to sort it out. Jung-Soo doesn’t want to do that to his own family.
- Neither of Jung-Soo’s sons intends to take over the leadership or ownership of the software company. How does he divide his estate equally between his two sons, while ensuring ongoing income for his wife? His assets are subject to two different tax codes – Korea and the U.S. Plus he owns 50% of a company that is experiencing significant growth.
How does he ensure that his sister and her children are taken care of, without tying up or impacting the estate he wants to leave to his own family?
- Jung Soo also realizes that he and his business partner have no clear strategy if either of them
should die during their leadership/ownership influence of their company. They’ve agreed in
principle to buy out the other’s share with the proceeds going to the deceased’s estate. But they’ve never agreed to the terms for the buyout.
- There’s also the question of their new executives. They need to be competitive in compensation, if they want the best talent. Jung-Soo is concerned that hiring costs will cut into reserves they need for business expansion.
Financial Planning Focus:
Income Protection and Wealth Preservation
Wealth Transfer to Heirs and Future Generations
Business, Executive Compensation and Employee Benefits Planning
The Financial Alternatives and Strategic Planning proposal recommended:
Estate Planning for Family: Establish separate trusts in the U.S. and Korea for his two sons, funded with in-country assets with no co-mingling.
Planning for Korean Relatives: Establish trust for Jung-Soo’s sister and her children with the proceeds from a life insurance policy on Jung-Soo.
Business Buy-Out Plan: Establish a buy-sell agreement with a dynamic formula to determine the company value based on an agreed performance measure; with that liability pre-funded through a tax-favored corporate benefit program; proceeds from company sale to be placed in a trust with his wife as beneficiary.
Executive Incentive Plan: Create customized executive performance-based compensation programs for each of the company’s new hires.
Jung-Soo agreed to the plan. He requested an additional life insurance policy as a safeguard for his wife’s income while the estate is being settled. TPBC worked with Jung-Soo’s U.S. and Korean lawyers and accountants as well as enlisting the services of a U.S.-based insurance agent, a business appraisal firm, and a Korean investment advisor.
Evaluation and Review Schedule: Semi-Annual re-evaluation of asset value and distribution plan to ensure that both sons share equally in Jung-Soo’s estate.
Outcome: With his long-term planning settled and a review process in place, Jung-Soo is now able to focus on his company and its growth potential. He also feels confident and relieved that his family will be cared for and will not spend years sorting out his estate as Jung-Soo and his sister had to do with their father’s.