Balancing Family Dynamics with Business Succession Planning

One of the most challenging aspects of developing your estate plan is what you leave behind for your family. It is very difficult to determine who will get what and why. It’s even more complex when there is a business involved. Your estate plan needs to specifically address what happens with your business in the event you are no longer involved because of retirement, illness or death. Balancing your family dynamics with a sound business succession plan is no easy task.

What is Your Business Structure?

The first thing to look at is the structure of the business. If it is a smaller family owned and operated business, then you may have already been grooming a family member (spouse, children, siblings) to take over when the time comes. That should make things easier when mapping your succession plan. However, there are still plenty of details to work out regarding ownership stakes for any family members and defining any new management roles.

Larger businesses and corporations are generally much more complex when it comes to succession plans and estate inheritances. You will have an ownership stake in the company that needs to be distributed to your heirs. Then, you probably have your leadership role in the company that needs to be filled. Your position may not necessarily be taken over by a family member, but rather someone in the company that you have identified and trained as part of your succession plan.

Succession Planning Tips

When it comes to transferring your stake in a business to a family member (or multiple family members), it’s always important to remember that management and ownership are not the same. This will be a key factor in determining both your estate plan and your business succession plan.

Here are some other succession planning tips that will help balance family dynamics and the future success of your business:

• It’s Never Too Early to Plan – Some wise entrepreneurs will build a family succession plan right into their original business plan. We’re not all that ahead of the game, but succession planning should always be a priority. The more your plan is defined and the pieces are in place, the smoother the transition will be when the time comes.
• Talk with Your Family – It’s important to involve your family in important estate planning and succession planning decisions. It will minimize discord when the plan is ultimately enacted and everyone will be prepared to handle the transition. Also, you can make sure that certain family members even want to have a stake in your business before you give it to them.
• Think Logically, Not Emotionally – This is easier said than done when it comes to family matters. However, the health of your business will depend on a smart succession plan. If a family member isn’t the right person to take over for you, then don’t just put them in charge because you think you have to. Make good decisions for the success of the business, not emotional ones because you feel pressured by your family obligations.
• Train Your Successor(s) – Last but certainly not least, you want to train and prepare your successor(s). Whether it’s family members or high-ranking management, anyone taking over your role as owner or leader should know what they are doing and be ready for the transition. This is a vital part of your succession plan!
• Get Professional Support – You don’t to go it alone when making these major life and business decisions. Seek professional help and advice from lawyers, financial advisors, accountants, tax planners, business coaches and others who can provide objective guidance and help you formulate the best possible succession plan.

Illumination Wealth his here to help business owners with their estate planning and succession planning needs. To learn more about our services and to schedule your first no-obligation consultation with one of our leading financial advisors, contact us today!