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Protect your Future by Planning in the Present

Most people believe that succession planning is synonymous with estate planning; wills, trusts, estate tax, life insurance, franchisor/manufacturer approval or gifts to family members. No doubt estate planning is an important component of succession planning. However, for anyone who has struggled with family squabbles, successor development, retaining and recruiting top talent, and unreasonable strategic partners I can assure you there is more to succession planning than estate planning. The best estate plan on the planet is no assurance of the continuation of business success.

That being said, estate planning is no cake walk and merits important discussion. The combination of administrative structures unique to estate planning and personal family feelings create a planning venue that can go from ordinary to befuddling in less than 4 seconds.

Hurdle # 1 – Trying to Understand what your attorney is talking about

The terminology associated with trusts, probate, Federal estate tax, State inheritance tax, executors and trustees can be so difficult to understand that it makes your ears bleed. Just when you think you have an understanding of what’s going to happen, your attorney introduces another new concept and you are lost again.

Hurdle # 2 - Navigating all the microscopic details that have such significant consequences

I am talking about such stimulating subjects as property titling, valuation discounts, Crummey notifications, Statues of Limitations, community property, disclaimers, successor trustees, trust protectors, GST allowances, alternate valuation dates, rules of perpetuity, salami and baloney. It’s reasonable to think your head is going to explode if the hot shot tax attorney mentions one more thing that is critical to estate planning. The stakes are high in these estate planning details so your attention is critical; however, some of these issues are more important than others and some just require time to answer. Keep in mind that there is no perfect estate plan and it is better to have a good plan than to have no plan while you are searching for the best answer.

Hurdle # 3 – The dreaded estate planning discussion

Having endured the first two hurdles, you have the third hurdle that most would view as a classic family business lose/lose conundrum: the dreaded estate planning discussion. Most often, this involves trying to explain to your spouse, children and loved ones the estate plans that you at best marginally understand. Tensions and emotions run high, and one might consider it abnormal to discuss estate plans with competitive and potentially entitled beneficiaries.

To help you through this last leap, consider the prospective benefits; don’t focus on the height of the hurdle. Consider the following golden rules:

  1. Only include those who are capable of absorbing what you will be explaining. That means, don’t include children or those lacking the emotional stability to effectively consider what will be shared.
  2. Provide information at a depth and volume that it can be digested. If you think you were confused as described in the first two hurdles, consider the plight of your beneficiaries. They could be even more overwhelmed by the nomenclature and complexity of structures. Therefore, plan a series of meetings with repetitive review that gives them an opportunity to absorb the information at a reasonable rate.

When it comes to describing the structure of your documents and explaining (testing) your intentions, you don’t have to be the one delivering the news. In fact, you don’t even have to be in the room, but unless there are anticipated seismic issues, it is better that you are present. Typically, it is better for your succession planner or attorney to offer the explanation, since they likely understand the tax and administrative structures better. Furthermore, they can provide background, purpose and reason without concern regarding emotional reprisal, and if something really sets off a beneficiary you can blame it on their advice and defuse the situation by stating that you will reconsider. Note, you don’t have to reconsider; you just have to get out of the meeting without igniting a family emotional bomb. Hopefully you can plan on future meetings to spoon feed the complicated body of estate planning information and to provide review because over time the estate planning mumbo jumbo can run together, demanding more explanation.

There are reasonable grounds for dreading a discussion of your estate plans. Take under consideration that surprise is the nemesis of seamless estate administration, and Murphy’s Law is undoubtedly at play: if it can go wrong it will.

If you are going to invest significant time and money in your estate planning it is worth the time and effort to discuss with those it will impact. Just do it in a manner that provides you some cover and also provides a process through which your beneficiaries can genuinely gain an understanding of what you have done, how it will affect them and the future of the business.


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