For those who run a family business, a succession plan and an estate plan go hand-in-hand. Determining ownership and management of the family business represents a significant portion of the stress and concern many people feel when developing a comprehensive estate plan.
Creating a plan that guarantees a successful transition is paramount in helping individuals achieve peace of mind. Here are five tips to consider when drafting your estate plan.
- Start planning early: It is not uncommon for financial experts to recommend having some exit strategy language in the initial business plan. Even once the business has been established, planning for your transition 5 or 10 years down the line is recommended.
- Involve family members in discussions: Simply developing and announcing a succession plan can potentially cause disputes and family discord. Discussing the plan with those who have a stake in the business gives them all a share in the success of the plan.
- Be realistic: Individuals might want to turn the business over to a first-born son, for example, or someone who has been groomed to take over. What if this person does not have the skills, business acumen or desire to run the organization? Perhaps there is a better choice.
- Do what’s best for the business: Similar to the earlier point, you might believe that the succession plan should go in one direction, but thorough examination might point you in a new direction.
- Train your successor(s): Once your successor has been chosen, it is crucial that you take them under your wing and provide information and resources critical to the successful operation of the organization. Planning ahead gives you time to work with this individual or group of people to ensure you’ve passed along your knowledge and insight.
It is important to work with an experienced attorney in developing your business succession plan and your estate plan as a whole. There are several documents and numerous contingencies to examine when considering the future operation of your organization.
