Estate planning can be a challenging process for nearly anyone. It forces people to focus directly on their own mortality and determine what should happen to their assets when they pass away. One critical aspect of estate planning - and a reason why the process shouldn't be considered a one-and-done attorney meeting - centers on business succession planning.
Family businesses play a crucial role in the American economy. For this reason, business owners realize that they not only have to protect their legacy but they have a responsibility to their community. For these reasons, it is wise to consider your business succession plan when putting together a comprehensive estate plan.
While there are many things to consider while drafting an estate plan, ensuring that your business is protected should be paramount. A recent Forbes article highlighted five issues that must be addressed through the business succession planning process:
- Generational transition: Even with the best of intentions, not all family businesses make the transition from generation to generation. It is wise to consider this and get honest answers from loved ones regarding their stake in the organization.
- Alignment of family interests: While the company might have been started with one over-arching goal, successive generations might have different goals entirely.
- Balancing of financial returns: Business valuation can be a complex topic and creating a buyout agreement for the retiring parties can become emotionally charged. An experienced attorney can provide guidance and answers throughout the process.
- Interfamily disputes: Similar to the alignment of family interests, it might be possible for long-standing disputes to create generational rifts regarding the growth and management of the family business.
- Estate and inheritance issues: Business succession planning and estate planning go hand in hand. It is crucial to use these documents to discuss what might need to happen when a family member who is significantly involved in the business passes away.
Creating a succession plan for your family business might be emotionally challenging. Long-standing disputes or family differences might get in the way of a smooth transition. With the proper documents in place, however, you can avoid many disputes in the future. Schedule a consultation with a skilled estate planning attorney to discuss your specific concerns.