Straight Talk on Succession Planning
My father grew his father’s business from a very small firm to one which today employs over 300 people in several different companies. After receiving a graduate business degree and working elsewhere for a few years, I decided to help out, serving as Dad’s number one. My father is 68, driven, high-energy (he drives his own racecar) and easily distracted. He is also completely unwilling to talk about succession or estate planning.
My brothers have other career interests and do not work for the family business. Dad underwrites their lifestyles. His constant pestering and nagging at my siblings for not being more self-sufficient and independent blew up at a recent family meeting. Mom’s furious at Dad and, by extension, me.
Question: How do I get Dad to start talking and do something about estate planning and succession? How do I get my siblings to grow up?
Regardless of whether your father ultimately chooses to “let go” gracefully—and we hope the company’s financial and legal advisors have spoken frankly of the financial and managerial downsides to not addressing succession with both of your parents—there are proactive steps you and your siblings can take.
Lock yourselves away for a day and imagine this scenario: Dad dies while racing his car; Mom inherits his entire estate. You somehow hold the companies together, or maybe you sell them, depending on how dependent they are on your father’s leadership for their success. During what remains of Mom’s life and upon her passing, those assets (stock in the family business, cash, investments, etc.) are gifted equally among you and your siblings.
The first questions you and your siblings need to ask one another are these: Do we want to be in business together? What are the pros and cons? If yes, then why? What are the rules we will play by?
Don’t forget that you will have something that your father never had: other shareholders. To further complicate matters, there will probably be more stock owned by family not working in the business than by you.
Of course, another scenario is that upon Mom’s death there are enough nonbusiness assets that your siblings get other things, and you get the business. But there may be unforeseen complexities to this resolution, as well. For example, what if you sell the business shortly after Mom’s death? Will your siblings think this is the fair and equal split that your mother wanted?
You and your siblings can come to an agreement on rules, your responsibilities to one another as business partners, how you’ll make decisions, and how you’ll handle disagreements in ways that protect the integrity of your family and your shared enterprise. If worst comes to worst, at least all of you and your spouses will know how you are going to handle things when, eventually, they are passed on to you.
And if you can find the right moment to share your unified vision and plans with your father, he may be impressed enough by your care and foresight that he actually sees you as responsible adults, and realizes that he, too, has a responsibility to participate in the process by initiating the steps that arrange for the smooth and strategic transfer of the business to your generation.
– The Advisor
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