Succession planning: conversations are the key

This article was first published in The Herald.

Succession planning is a key consideration for anyone who owns a business, a second home, or any other asset that requires ongoing management. It’s not always easy. Although, as with many spring cleaning tasks, often the hardest part is getting started.

It’s understandable that some people put off their succession planning until it’s too late. In the Shepherd and Wedderburn Private Wealth & Tax team it’s a subject that comes up with our clients from time to time, and some people find it hard to imagine a day when they won’t be able to continue running their business or to make decisions about their personal affairs. Another common concern is that the process will involve difficult conversations that shine a light on family relationship problems that have previously been kept under wraps. And there is some truth in that.

We can advise you on which of the many legal options are most suitable for your particular situation, but we have to start with a full understanding of what that is. If the key asset is a family business, for example, and there are several children who could take over, will they all do so? If not, will the others be compensated in some way? Do the people who you would like to run the business actually want that responsibility? Will they need help and guidance from people outside the family?

These conversations might well extend beyond the family. If the business has key employees that are important to its future, for example, questions like those above will need to be addressed with them too.

Everything will need to be thoroughly discussed – meaning that people get a chance to share their thoughts and, just as importantly, listen carefully to others’ views. That isn’t always easy, but it’s important to remember that disagreements are normal. Indeed, many people would say that airing them is healthier than leaving them unspoken.

Remember, also, that without a succession plan in place the same questions will still need to be resolved, but everything will be more difficult – and potentially more expensive. For example, people will still need to decide who will run a family business and inherit particular assets, but it will be even harder for them to make wise judgements without your guidance, and possibly also in an emotionally heightened environment.

Putting a succession plan in place early also gives you increased scope to organise things tax-efficiently, which can make a really significant difference. But perhaps the biggest benefit is the peace of mind that comes from knowing that you’ve ensured that your loved ones won’t have to deal with what can be a very difficult situation.

That’s something else that spring cleaning and succession planning have in common – it feels great when you’ve finally got it done.

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