The Most Neglected Area of Estate Planning

Friend of the firm, Marvin Blum, Founder and Managing Partner of The Blum Firm, PC, with offices in Fort Worth, Dallas, Austin and Houston, emphasizes the importance of succession planning for business owners. He recommends a first step of bringing together an advisory planning team. K&A’s merger and acquisition specialists bring a practical and unique expertise to such teams.

The Most Neglected Area of Estate Planning

In a radio interview, I was once asked “What’s the most neglected area of estate planning?” Without hesitation, I replied: “business succession planning.”

Last week’s email on prenup planning referred to Jon Moore’s article in Family Business magazine entitled “In a Divorce, Who Gets What?” In it, Moore emphasizes the importance of advance planning so family businesses survive divorce and/or death. He stresses the concept of “integrated planning,” coordinating all the puzzle pieces: estate planning, disaster planning, asset protection planning, and business continuity planning. It takes more than hope and luck for a business to transition through major family changes and disruptions, especially the death of a founder. It takes careful planning.

Most business owners have a strong emotional connection with the business they created, almost as if it’s another child. They care what happens to the business after they’re gone. They have a keen interest in building a sustainable business that passes down as a meaningful legacy to future generations. Given the aging demographic of many baby boomer business founders, there is an urgent need to plan for what happens WHEN, not IF, the founder is no longer running the business. Family business owners are often so emotionally tied to the business that they have a hard time imagining the business without them. They believe they are indispensable. But as Charles de Gaulle, former president of France, famously said: “Cemeteries are full of indispensable people.”

When it comes to business succession planning (also known as business continuity planning or business transition planning), there are no easy solutions or fill-in-the-blank forms. The hardest part is to get started. Here’s a suggestion for the first step: call a meeting of those most familiar with you and your business and designate them as your planning team. Choose from among your CPA, attorney, banker, financial advisor, life insurance professional, family counselor, and other key stakeholders. Bring your planning team to the table to start the conversation. They will gradually help you develop a succession plan that makes sense for your business and your family. Then, they will guide you through the steps to implement the plan. Don’t try to go it alone.

When the time comes to develop the plan, it really boils down to three choices in the toolbox:
• Transfer the business to family members
• Sell the business to inside parties (people within the business)
• Sell the business to an outside party

In coming emails, we’ll explore more about the business succession planning process, and dive into each of these options. The Blum Firm would be honored to partner with you to help you achieve a successful continuation of the business legacy you worked so hard to build.

Marvin E. Blum, J.D, C.P.A.