What Will Happen To The Family Business After Your Death?

Family business succession planning - Keith Thomson, CFP®, CIM®, FCSI®Estate planning can be a complex and difficult series of decisions. Not only does it ask one to consider his or her own mortality but also to decide who should get the things acquired after a lifetime of work. However, when a family business is involved, the estate planning process can take on a whole new dimension. Will you leave the business to your children or will you sell it? Do your children want to run the business? Better yet, can your children run the business? A lot of times, a family business feels very much like your “baby,” so how do you make this complicated decision? Paul Dalby (special to the Star) discusses in “Family Business Succession Planning Starts with a Family Conference.”

Many Canadian families are facing tough decisions about their family business. In fact, according to Dalby, “companies with fewer than 50 employees represent close to 98 percent of all business in Canada and employ slightly more than half the workforce.” In order to make the best possible decision for themselves, their children, and the business, many are turning to experts in succession planning. Succession planning is the process of creating a blueprint for the transfer of the knowledge, skills, management, control, and ownership of a family business from one generation to the next.

However, some estate planning pros believe that turning to succession planning right off the bat isn’t wise. Susan Rechil, a financial planner, believes that the first step should always be a family meeting, according to the article. There are a lot of hard questions that must be answered, and it will require brutal honesty from those involved. For instance, parents have to face facts and recognize whether their children have the ability and desire to take over the business. Both pieces are critical. If the children don’t possess the business acumen necessary, it may mean bringing in an outsider to actually manage the business. On the other hand, children have to honestly tell their parents how they feel about the business and what they see themselves doing in the future.

Susan Rechil notes in the article that whatever the family conference reveals, it’s always good to have a backup plan. Your children may have every intention in the world of running the family business, but what if they go off to college, fall in love with someone, get married, and move away? What if they find a passion for a completely unrelated industry? Always have a plan A and plan B.

Here are some succession-planning tips from the Canada Business Network:

  • Start planning five years before you retire.
  • Make sure the planning involves the whole family and includes both the future ownership of the business and a fair market valuation of the business.
  • Outline all of your options.
  • Seek professional help, such as that from a financial planner, lawyer, insurance broker, and accountant.
  • Check out the legal and tax implications of your decision.

This material is provided for general information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities mentioned herein and is not intended for, or available to, residents of the U.S.A. or its territories or possessions. Every effort has been made to compile this material from reliable sources however, no warranty can be made as to its accuracy or completeness. Please speak with your investment professional before acting on the information contained herein. All opinions expressed and data provided herein are subject to change without notice and do not necessarily reflect the opinions of Stonegate Private Counsel, a division of CI Private Counsel or its affiliates.

Keith N. Thomson

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