Protect Your Family’s Future with Succession Planning

Estate-planningIA

For private business owners, particularly family-owned businesses, succession planning should be a top concern. Two out of three family businesses fail to survive from the first generation to the second and only 15 percent survive from a second to a third. The problem is, many companies either don’t have a plan or they have a plan that is outdated.

Lee Resnick, a partner with Resnick Associates, a nationally recognized estate planning and business succession firm, said that only good can come from either creating or reviewing a plan. Resnick, along with his brother, Terry Resnick, met with travel plaza and truckstop operators during the Human Library at The NATSO Show to discuss their current family and business estate and succession planning structure.

Because businesses and families grow and change, the succession plan likely will change as well. “A plan that was put in place at one time may have been perfect, but if they don’t update it, they’re sitting on an antiquated plan that doesn’t fit their current situation,” Lee said, adding that business owners should review the plan annually. “You can get off the mark very quickly with an existing plan.”

Sometimes parents don’t want to think about estate planning, but Lee said it is important for them to remember that they need to protect their children’s future. “If you, mom and dad, don’t address this, it affects your kids’ future as well as your employees and their families. It could have a huge ripple effect,” he said.

Terry said it is important for business owners to take emotion out of succession planning. “You’re building a successful company and you want it to continue. If you don’t take those steps, there will be a lot of fallout financially and professionally,” he said.

With family businesses there are also family dynamics involved and interpersonal relationships come into play. “Our most successful clients all have strong family relationships. They work on that,” Terry said.

Succession planning is also relevant to partnerships. In many cases the partners create a buy/sell agreement when founding the business that gives one partner the option of buying the other partner’s share in the event of a death. As time goes on, both of the partners may involve their children in the business, so they may need to revisit the original agreement in order to protect their families’ long-term interests.

Succession planning can also help owners mitigate taxes that could devastate the business. “If family and private businesses are worth millions of dollars, they’re often forced to liquidate their business to pay estate taxes,” Lee said.

The Resnicks have a thorough checklist of planning and legal documents business owners should have, including personal planning, wills, trusts, LLC, family limited partnerships, insurance for estate planning or buy/sell funding, that they will share during the sessions.

The Resnicks suggest business owners attend succession planning consults with their spouses, even if the spouses aren’t active in the day-to-day operations of the business. “We find that it is almost more important if they’re not active,” Lee said. “If they are there it can open up dialogue between the two of them.”

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