If you have a family business or family farm, you know how hard it is to be successful. But if you’d like that success to continue after you retire or after you die, the challenge may be even greater. Succession planning is more than choosing who’ll succeed you as “boss.”
A well-thought-out succession plan can:
- Keep things running smoothly after you retire or after you die. That can mean more income for you and your loved ones, now and into the future.
- Transfer management responsibilities to someone you choose, with the skills to succeed (perhaps with input from your family or from other business advisors).
- Give your successor(s) time to grow into the job. (Having your successor work alongside you, gaining experience and expertise, is better than having him or her thrown into the job when you can’t do it anymore.)
- Help fund your retirement. The business, if it keeps running smoothly, can provide you with much-needed income. Or if you choose to sell it, the business can provide a tidy sum to invest in other ways.
- Help your successor(s) buy the business or pay required taxes. Having someone buy your business can be a big plus, but only if the buyer has the money to pay you. And leaving the family farm to your children may mean a lot to them, but only if they can pay any taxes that might be due. Life insurance can provide your successors with funds to buy the business or pay any taxes owed.
- Distribute assets fairly. Some of your children may have contributed to the success of your business, while others pursued a career of their own. Some family members may want land or a piece of the business, while others would prefer to have cash. A proper plan can address these issues.
- Reduce taxes. If you plan ahead, estate taxes, property taxes and capital gains taxes can be managed or reduced.
- Protect your assets from lawsuits, creditors and more. Proper planning can protect your business and your personal assets so they can’t be taken from you or your loved ones – now or after you’re gone.
What’s included in a succession plan? From the list above, you can see that there are lots of things to consider. It all depends on what you’d like to accomplish. An estate plan and a financial plan are essential. You may also want to do tax planning, asset protection planning and more.
If you run a business or a farming operation, you probably rely on some professional advisors already. Talk to them about goals and objectives for your retirement and your estate. Your accountant, financial advisor, insurance agent and attorney can each be helpful.
If you can, get your key advisors to work together as a team. That way, you can create a comprehensive and coordinated succession plan – one that addresses all your needs and concerns.