Planning for the future is often a difficult prospect, especially when it is the future of a Texas family-owned business or corporation that will outlive the current executive. However, a transparent and carefully crafted plan helps to keep the family legacy intact, provides wealth protection and allows for a predictable distribution of assets to the heirs and surviving spouse. The vital business succession aspect of estate planning involves training the next generation of executives, creating a protocol for succession and considering the family dynamics.
Research shows that around 70 percent of family-owned businesses fail to transition to the second generation. One cause of this is poor planning, which may lead to intestacy, will contest litigation and lost business revenue. An estate plan allows the executive to create a formal path for transition that minimizes business risk, the inheritance tax and other associated fees and taxes.
Large corporations typically have plans for leadership transition and groom individuals who will be assuming leadership roles. In a family business, however, a single person often runs the business. Early planning allows an executive to assist heirs in designing a career development plan that prepares them for taking over the business someday.
The initiation of an estate plan requires no small amount of courage and foresight. Envisioning how a business will be conducted after transition of executive authority isn’t easy, but it is necessary for reducing costs and leaving one’s legacy intact. Family dynamics, identification of future leaders, asset valuation and many other factors play into the final estate plan. An estate planning attorney may be able to assist individuals with the creation of legally binding documents governing estate administration and business transition plans.
Source: Tampa Bay Business Journal, “How To: Succession planning in a family-owned business,” Jo-Lynn Brown, Jan. 25, 2013