Estate Planning in Utah for Pharmacy Owners

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many Utah pharmacy and drug store owners are experiencing lower profit margins and have considered selling. A roll-up of the pharmacy industry has been occurring for a number of years, consolidating the pharmacy seller’s customer traffic into fewer pharmacy locations in Utah. However, there are a number of pharmacies that are not in a geographic location with other nearby pharmacies, so consolidation can’t take place. Some pharmacy and drug store owners, despite where they are located or what is happening in the industry, have taken a stance and won’t consider selling. However, just like paying taxes, an exit of the business, is eventually inevitable.

In all industries, estate planning is a topic many people shy away from. For the pharmacy owner 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 Utah 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 Utah 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 Utah 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 an owner's family in the event of a partner’s death, the buy-sell agreement is often funded with a life insurance policy.

Buy-sell agreements, estate planning, and the pharmacy transfer should incorporate a Utah pharmacy business valuation completed by a third party who has expertise in the pharmacy industry.  It is wise to consult a company that performs a large number of pharmacy business valuations each year, and has up-to-date industry data as a basis for the conclusions. Using simple accounting formulas or multipliers with valuators inexperienced in the pharmacy industry will not provide an accurate business valuation.

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

Five Additional Tips for Utah Drug Store Owners:       
1. When the family pharmacy is the sole means of income for several family members it is even more crucial to have a succession plan in place.
2. Estate plans should be developed with clear directives to avoid disputes.
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 UT pharmacy owner especially if there are some family that work in the business and others that don’t.