Business owners are a special breed of individuals who often endure years of financial and personal sacrifice before finding success. For many, it’s important that all those years of sacrifice mean something and that a family business continue to grow and thrive after their retirement and death.
A recent report cited on wealthmanagement.com indicates that roughly 8 million business owners are nearing retirement age. Many of these individuals plan to pass a family-owned and run business down to a son, daughter or grandchild. Often, however, business owners fail to take the appropriate and necessary estate planning steps to ensure for a successful and seamless business succession.
Often cited as being among the most complex of all estate planning matters, succession planning requires that business owners exercise extreme diligence and foresight. The last thing a mother or father who spent years building a successful business wants is to see that business fail when passed on to future generations. Thankfully, there are a number of things business owners can do to help ensure for a business’s success upon their retirement or death.
It’s critical that business owners who plan to pass a business to future generations understand the basic principles of estate planning. For example, it’s critical to know the difference between those assets that are passed through probate and those that are passed via beneficiary designations. An individual who fails to ensure a will and beneficiary designations are up-to-date and aligned may end up leaving assets to unintended parties.
Additionally, business owners would be wise to protect future generations from the pitfalls that often accompany large inheritances. Setting up trusts and appointing trustees to manage the assets of intended heirs can help protect a grown son, daughter or grandchild from getting caught up in having too much too soon.
Finally, when planning for the succession of a business, small business owners may choose to do so without the input of relatives. In many cases, including sons or daughters in the planning of a business succession only creates conflict and problems. Business owners would therefore be wise to take action and set things up according to their wishes and then put a business succession plan into action prior to their retirement or death.
Source: Fox Business, “Tips for Boomers Looking to Hand Down the Family Business,” Casey Dowd, Oct. 31, 2013