Six Estate Planning Questions Business Owners Must Ask Themselves for a Smooth Transition to the Next Generation
You’ve heard the story before: the head of a family business dies, leaving each of two children a 49 percent interest in the business, with the remaining 2 percent, the swing vote, left to the surviving spouse, who does not have much hands-on business experience.
Frequently in these scenarios, one child takes on the leadership role; the other a lesser position. As the surviving spouse ages, he/she becomes more influenced by one of the children and family friction mounts. A confrontation is inevitable and the child in the leadership role is voted out. While this is certainly a bad situation for that individual; it can be an even graver one for the family business.
By failing in one of life’s most important remaining task—to plan his/her estate—the founder of the business causes one of his heirs to be an unintended victim. Make sure this doesn’t happen to your family business.
The unfavorable business transition experiences described above may have been avoided had the head of the family business asked—and answered these six critical questions.
- How can I provide for an equitable distribution of my estate among my children?
- Who should control and eventually own the family business?
- How can I use my business to fuel the growth of my estate outside of my business interests?
- How do I provide for my family’s income needs, especially those of my spouse and dependent children, after my death?
- How can I help preserve my assets from the claims of creditors during my lifetime and at my death?
- How can I minimize estate taxes?
An owner’s thoughtful answers to these questions, followed by appropriate implementation of an Exit Plan, may well prevent a similar experience in your family and support a smoother business transition for all parties involved.
If you have any questions about creating an estate plan prior to your business exit, please contact us to discuss your family business.