When it comes to succession and estate planning, it’s never too early to start thinking – and talking – about it.
However, some business owners prefer not to confront their own mortality and just continue on running their business while avoiding thinking about, or planning for, the inevitable i.e. their ‘exit’. This creates the perfect environment for conflict among those left behind.
Business consultant Richard Cummins believes it’s up to the older generation to get their business affairs in order and says communication is key.
As a management accountant, Richard is involved with every aspect of his clients’ financial lives, including sitting on finance committees and family business boards.
Richard shared some of his experiences helping clients with retirement and estate planning in our eBook: How to choose the right structure for your business. Below is an excerpt from the eBook:
If your business is your major asset and you want to leave your estate equally to separate beneficiaries, it is often best to sell the business and use the cash to diversify your investments. These new investments may or may not be made in a way that mirrors how you want to leave specific investments to the beneficiaries in your will.
Of course, there are different views on this. Some people may think: “I don’t want to sell my business now – my children can sort it out after I die.”
Others may say: “I want to minimise potential conflict between my children.” (If you have one child working in your business and three children who aren’t, and you die without having sold the business or developed a succession plan, you are likely making it very difficult for all the children upon your death.)
I’ve always taken the view that it is up to the older generation to take responsibility to get their estate planning in order and I’ve often been involved in family meetings where the children are asked their expectations.
The older generation should not be threatened by this situation because they’re still in control and they don’t have to change their minds, but at least they know what the children think, and that may be the first conversation they’ve had about it.
It’s always good to talk about it.
If you would like help to get started on a succession plan for your business, contact the JPAbusiness team on 02 6360 0360 (Orange) or 02 9893 1803 (Parramatta) for a confidential, obligation-free discussion.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.