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Common Estate Planning Pitfalls Impacting Business Succession Goals: Part I
February 28, 2008
A major misconception is that estate planning is the sum and substance of business succession planning. After spending lots of time and money with an attorney, it is easy to conclude that with a new revocable trust, a joint life insurance policy and the gift of a few shares of the business to Junior and Sissy, “We have sealed the deal: succession planning is done and those all-knowing consultants can shut up and let everyone get back to business.”
With all due respect, estate planning is an important component of succession planning. It is high priority to everyone who seeks to perpetuate a business legacy. However, estate planning is only one of many interdependent factors that impact Succession Success.
What is not understood by the majority is that if estate planning is addressed independently, without consideration of how it impacts other areas critical to succession such as family/partner harmony, leadership continuity, and business performance; good intentions can create significant problems for love-ones, designated successors and dedicated managers who have a vested interest in your business’ ongoing success.
This week’s blogs will focus on the most common estate planning issues, how they impact business succession goals, and suggestions for overcoming these obstacles. Please note, that the following are only suggestions and not advice, as everyone’s planning situation differs. So, let’s dive in on the first most common estate planning issue:
- “I have adopted a revocable living trust, but I have not followed up with the re-titling of my property, including the business stock, to the revocable trust.”
Potential Impact: Your estate and, notably, your business are now subject to probate. Your heirs and successors are likely to be exposed to unnecessary administrative complexities and publicity at a most inopportune time.
Consider: Don’t stop the estate planning train until you have transferred the title of your property to your revocable trust. This should not be a taxable event and you will not be giving up control of your property. Assets titled in your revocable trust should not be subject to probate or guardianship proceedings.
Does this sound familiar? This is only the tip of the iceberg. Stand by, I will focus on the 8 most common estate planning issues that create business succession problems in the next two postings.
Posted by Loyd Rawls on February 28, 2008 | Comments (0)
