Estate Planning for Pharmacy Owners in Washington

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many WA pharmacy owners are experiencing lower profit margins and have considered selling. For a number of years, a pharmacy industry roll-up has been occurring, and consolidation of the pharmacy seller’s customer traffic into fewer pharmacy locations. However, there are a number of Washington pharmacies that are located with other nearby pharmacies geographically so consolidation won't take place. Some drug store and pharmacy owners have, despite where their location or what is happening in the industry, taken a stance and refuse to consider selling.  However, as with things like taxes, an exit strategy for the business is inevitably required.

Estate Planning is a topic that many people working in all industries shy away from. For the pharmacy owner in WA who works 6 days a week, takes very few vacations, fills scripts all day, then mops the floor and does the books at night, there usually isn’t much time to consider additional things such as estate planning. However, knowing that there will eventually be a transfer of the business, it is important for the pharmacy owner to consider a proper succession plan for the pharmacy business.

Developing a plan to transfer the business will be time consuming, but done correctly will allow the business to be successfully transferred in an acceptable 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 Washington 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 Washington 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 pharmacy should incorporate a WA 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 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 in Washington refuses to accept their mortality and plan accordingly. The only pharmacist in some small 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 Washington 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:        
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. Disputes can be avoided if estate plans are be developed with clear directives.
3. Minimizing tax liabilities is a major goal for most who complete an estate plan, which means expert tax advice should be sought.
4. Many online books and websites are available that provide advice and documents for developing an estate plan. When choosing the self-help route, it is recommended to have a paid expert review the completed documentation to ensure that it legally complies when the time comes.
5. While the estate plan is being developed, it is important to talk with children and other family members of the pharmacy owner in Washington, especially if there are some family members that work in the business and others that don’t.