Do you own a family business?
If so, you have plenty of company. More than 90% of U.S. businesses are family businesses. Out of the Fortune 500, 150 are family businesses.
Now, would you like to hear some really startling statistics?
Only 30% of family businesses will survive into the family’s second generation, 12% to the third generation and only 4% last to the fourth generation.
Scary statistics, aren’t they?
All the blood, sweat and tears you put into building the family business…just gone.
Wondering how this happens?
The number one reason is lack of family business succession planning.
You can probably avoid many of the problems that can take your family business under with sound estate planning that takes family business succession plans into account.
Here are a few things you need to think about:
What Happens When You Give Up Control?
Plan your retirement around not having income from the business. That will keep your financial well-being separate from that of the business and it will be easier for you to turn over control of the company you built. It will make the company and you much healthier financially. Talk to your estate planning attorney and plan your retirement now so that you are no longer dependent upon the company for income when you retire.
Who Takes Over?
Does your entire family work in the business? Have you groomed one of your children to take over? How do the other siblings feel about that? Consider what will happen if you leave one child in charge of the business and others in charge of assets the company relies on. This can bring old childhood resentments to the forefront if siblings feel that one has been favored over the others. If all your assets are tied together and there is no harmony between the various controlling parties, your company and your family could be destroyed.
Have You Planned for a Management Transition?
Once you retire to play golf in Florida, who will manage the company? Will management consist wholly of family members or do you have employees in key positions who can take over? Have you discussed the possible management structure with your family? Make planning a smooth management transition a part of your estate planning process. The two are not totally separate processes if you own a family business.
How Do You Handle the Transfer of Assets?
This is an integral part of your estate plan and your family business succession plan. Will the transfer of assets take place with lifetime sales/gifts/transfers or will the ownership of the company be transferred only upon your death. You need to ensure that you have enough liquid assets left for you and your spouse to live on in retirement without putting the company into bankruptcy.
Many families just don’t want to deal with these issues. But dealing with issues as complex as these in a moment of crisis when you die or are rendered unable to make decisions by some illness or injury can mean disaster for your company. Taking them into account while everyone is able to focus on what is and isn’t important, and looking at the big picture for the survival of your family business, will make everyone’s life easier. A little painful introspection and thoughtful planning now will allow even your great- grandchildren to enjoy the fruits of your labor.
If you live or do business in Massachusetts, call us at (978) 263-6900 to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $750, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article.
To your family’s health, wealth and happiness!
David Feakes
P.S. Want to get started on the most important planning you’ll ever do for your family? Give our office a call at (978) 263-6900 to get started. You’ll be so glad you did.
David Feakes is the owner of The Parents Estate Planning Law Firm, PC – a law firm for families in the Acton, Massachusetts area. David helps parents protect the people they love the most. If you would like to receive David’s exclusive, free report, “Six Major Mistakes To Avoid When Choosing An Estate Planning Attorney,” you can get it right here.
The Parents Estate Planning Law Firm, PC
Latest posts by The Parents Estate Planning Law Firm, PC (see all)
- CONSIDER THIS BEFORE YOU CREATE A WILL ONLINE - March 16, 2023
