There are so many valuable tools that can be used by people who possess a variety of needs. Although everyone should have an estate plan, business owners need to strongly consider employing some estate planning strategies into their business succession plan.
This becomes particularly important when you are the head of a family-owned business. Some studies show that the more times a company gets handed down, the less chance it has of surviving. For example, only 3% of fourth-generation businesses succeed.
Conversely, they also point out an increase in success the earlier a succession plan gets developed. The reasons for this are not nearly as surprising as you would think. Part of creating a succession plan is choosing your replacement.
People may delay this because they either aren’t emotionally ready to make that decision, avoid it for lack of choices, or don’t plan to retire soon. However, no one plans on being in catastrophic accidents or passing away early. But these things do happen. Having a plan in place in case of an emergency can protect your family and the business they own.
By planning early and choosing a successor, you have the time you need to train and evaluate your replacement. People may be hesitant to pick their son or daughter as a replacement because of how it could look. Although you should base your decision on tangible factors outside of emotion, your child still might be the best person for the role.
When you give your replacement a chance to grow and develop, you will see whether they can handle the demands of the position. Either you or your child could decide that they aren’t suitable for the position.
If your family believes that you chose your child based on emotion rather than business acumen, they may change their opinion once they see your child thriving and succeeding.
Estate Planning Tools
Your needs are unique, and your attorney will build an estate plan based on what you are looking to achieve. However, there are some common strategies that business owners do employ.
An attorney can advise you on how to create a trust. There are various kinds of trusts that your lawyer can break down for you. But there are ways to mitigate business succession plan difficulties through the creation of a trust.
If you are struggling to appoint a successor—mainly because they don’t have the experience needed to fill the role, choose two or more. Make them co-trustees of the trust that includes the business. An odd number of trustees can be beneficial because decisions can get made by a majority vote.
If you are set on choosing two people to become co-trustees because you are worried about 1-1 disagreements between them, you can also add someone as a trust protector. Though their duties will be different, they can vote if the two co-trustees are stuck.
The Matus Law Group
Creating an estate plan is about providing you with peace of mind while preparing for the future. If you are ready to begin yours, we have a multitude of ways to help you. Contact The Matus Law Group to schedule your consultation today. We look forward to assisting you with your legal needs for years to come.