Estate Planning for Pharmacy Owners in Oklahoma

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many OK pharmacy owners are experiencing lower profit margins and have considered selling. For a number of years, a pharmacy industry roll-up has been occurring that has been consolidating the pharmacy seller’s customer traffic into fewer pharmacy locations. There are, however, several pharmacies in Oklahoma that are not in a geographic location with other nearby pharmacies, so consolidation doesn't take place. Despite what is happening in the industry or where they are located, some pharmacy and drug store owners have taken a stance and won’t consider selling. However, as it is with paying taxes, the exit of the business is eventually inevitable.

Estate Planning is a topic that many people in all industries tend to shy away from. For Oklahoma pharmacy owners who work 6 days a week, seldom takes a vacation, spends all day filling scripts, then mops the floor before doing the books at night, there typically isn’t much time to consider additional things such as estate planning. However, with knowledge that that there will be a transfer of the business eventually, it is important for the pharmacy owner to consider a proper plan of succession for the OK pharmacy business.

Developing a plan to transfer the business can be time consuming but, if done correctly, it will allow the business to be successfully transferred in a satisfactory manner. An estate plan for a pharmacy owner does not need to be changeless process. Fine-tuning, updating, and amendments are recommended as government regulations, economic conditions, and personal expectations change.

Estate planning allows a pharmacy owner to anticipate and arrange for the transfer of the drug store. The plan will be formatted in attempts to eliminate uncertainties, assist the transfer by trimming expenses, and reduce taxes.

The process may involve Trusts, Wills, Living Wills, Power of Attorney, Medical Power of Attorney, Business Valuations, Life Insurance, Charitable Remainder Trusts, Buy-Sell Agreements, and other legal documents. All of the different aspects of the estate planning are to provide the pharmacy owners in Oklahoma coordinated directives.

When there are non-family members as partners in the drug store business, it is essential that the estate planning incorporate a Buy-Sell Agreement. A buy-sell agreement, governs the transfer of the business between pharmacy partners. The agreement may also be known as a partner buyout agreement, or a business will. To help protect the family in the event of a partner’s death, the buy-sell agreement may be funded with a life insurance policy.

Estate planning, buy-sell agreements, and the transfer of the Oklahoma  Apharmacy should incorporate a pharmacy business valuation completed by a third party that has expertise in the pharmacy industry, performs a large number of pharmacy business valuations each year, and has current industry data as a basis for the conclusions. Using simple accounting formulas, multipliers, and valuators inexperienced in Oklahoma pharmacy will not provide an accurate business valuation.

Most pharmacy owners spend a major part of their life building the business. The efforts should not disappear because the pharmacy owner refuses to accept their mortality and plan accordingly. The only pharmacist in some small OK pharmacies is the owner. If the scripts can’t be filled by a licensed pharmacist then by law the customer files must be transferred to another pharmacy. Due to this, a pharmacy’s business value may drop to a negligible figure in just a few days after the passing of the owner. Contingencies outlined in an estate plan should address this issue. Unfortunately due to not having an effective plan in place, each year a number of pharmacy owners die and their family is left with an asset with very little value.

Tips OK drug store owners can use for estate planning:
        
1. When the family drug store is the sole means of income for several family members it becomes even more crucial to have a succession plan in place.
2. To avoid disputes, estate plans should be developed with clear directives.
3. Minimizing tax liabilities is a major objective for most completing an estate plan, therefore expert tax advice should be sought.
4. Many on-line documents and books are available that provide advice and documents for developing an estate plan. When going the self-help route, it is advisable to have a paid expert review the completed documentation to ensure that it can be legally complied with when the time comes.
5. While developing the estate plan it is essential to talk with children and other family members of the Oklahoma pharmacy owner especially if there are some family that work in the business and others that don’t.