When it’s time for you to pass the torch and leave your business to the next generation, there are a lot of details to consider.
This month on the CPMT podcast, we’re sitting down with Michelle Koufman, who specializes in family estate planning, and Jacob Rich, who focuses on business transactions, to discuss the best practices for your transition plan.
Start Early
The sooner you begin thinking about succession, the better. Starting early gives you time to identify future leaders, train them gradually, and adjust the plan as needed. It also reduces stress, both for you and for the next generation, when the transition eventually takes place. Planning ahead sets everyone up for success.
Revisit Often
Change happens, and your transition plan should reflect that. Even if you did draft a transition plan way back when your business really started going, chances are, your life is different now – and so, too, will be the nitty-gritty details that your transition plan is meant to cover. Our advice is to revisit your plan frequently. That could mean annually or even more, depending on your circumstances.
Involve Everyone
It’s not rare for there to be differences in how different family members are provided for in an estate or succession plan. After all, it could be that only one or two of your children are interested in learning the family business, while others are working on their own careers – yet, those who aren’t involved in the daily operations may be benefiting from the family business regardless. It’s important to involve everyone who will be affected by the plan so that everyone is on the same page about what to expect.
Make Intentions Clear
As Michelle explains in the podcast, there are times when, as explored above, there are differences in the assets that certain family members are left with. Her example is a daughter who is left a certain amount with the understanding that she will not benefit from any additional assets as part of a business’s acquisition. Meanwhile, provisions for her brother will look different, as his involvement in the business was more hands-on. This may be clear to you when you’re drafting your will, but once it’s time to execute your will, you won’t be available to explain your thought process. For that reason, it’s a good idea to clarify your intentions and codify them as part of your plans.
Think Ahead
Ten, twenty, or thirty years down the line, your business will look different, and so will the lives of the people who are affected by the transition plan you’ve set into writing. Consider how the distribution of your assets will look if your business is bringing in significantly more money in the future – or if it’s bringing in less. The language you use in your plan should reflect those possibilities in order to make it as equitable as possible.
Don’t Go It Alone
If you’re working on a transition plan for your business, you don’t have to figure out all the ins and outs by yourself. Our team at CPMT is always available to help with individualized, compassionate legal advice that takes into consideration your specific needs. Schedule your consultation today!