Iowa Baby Boomer business owners: Is your family business included in your estate planning? If not, the government may end up spending your kids’ inheritance.

Iowa ties North Dakota for fourth place in the nation in terms of per capita elderly population, with 14.7 percent of our residents in the 65-and-older age group, according to a 2004 U.S. Census Bureau press release. This statistic has many serious implications for the future health of our state, one of them being that over the next few decades, Iowa will play a big role in the enormous intergenerational transfer of wealth across the country.

A report from Insurance Journal’s March 2004 issue states, “By the year 2052, an estimated $40.6 trillion will change hands as Baby Boomers and their parents pass on their accumulated assets to their heirs.” A significant component of this wealth transfer will be due to the death or retirement of the owners of closely held or family businesses.

The Baby Boomer population (individuals born between 1946 and 1964) must prepare for this staggering transfer of wealth, both in their personal lives and in family enterprises. Though many Boomers expect to inherit their parents’ assets outright, including the family business, many have not considered the factors that could reduce those assets significantly. Estate taxes, the cost of health care, extended life expectancy and reduced Social Security benefits can diminish your parents’ estate, and in many instances threaten the survival of a family business.

How can business owners prepare to effectively transfer management and equity from one generation to the next? Planning, risk management and communication are key factors in creating and implementing succession plans that work.

The transfer of a privately held business from one owner to another can be crippled by the absence of an estate, business succession or contingency plan or by a plan that has not been updated to deal with tax code changes or changes in family structure. Business owners should consult experts in the legal, tax, insurance and financial fields to create a comprehensive strategy for transferring the business and the estate and for providing overall risk management solutions.

Once a succession plan is in place, it must be communicated to the family and company management. Whether the future company leader will be a family member or not, that successor must be trained and given authority to take over the reins eventually. Though creating and communicating such a plan may be difficult for any business, it is crucial to try to put as much structure in place as possible to prevent family issues from compromising the health of the business.

Through advance planning, Iowa’s Baby Boomers can lay the groundwork for a smooth transfer of assets and for the future success of family businesses. How Iowans prepare for the upcoming wealth transfer will have a great impact on the future of our state. Wouldn’t we rather keep the assets here in Iowa and in the family instead of letting Uncle Sam inherit the fruits of our labor?

Suzanna de Baca is the president of Private Capital Solutions Group, an investment and financial advisory firm based in Des Moines.