Succession Planning for the Family Business
Nothing’s guaranteed in business—except that you can’t run the show forever. If you want to make sure your spouse or kids aren’t forced to shut down the business, you need a plan, spelled out and locked in. I routinely encounter client estates who struggle with business succession. Siblings argue. Loans come due. Bank accounts get frozen. Here’s a streamlined approach to make it happen with minimal drama.
1. Make a Written Plan
Who will actually run the show if something happens to you? If it’s your spouse or one of the kids, make it official: Write down roles, responsibilities, and timelines for when the transition kicks in. It’s one thing to assume they know how to take over—another to ensure they’re ready.
If you’ve got more than one child involved—especially if they don’t see eye to eye—setting up a buy-sell agreement can keep the peace. It lays out the rules for buying or selling ownership shares, so no one can force a sibling out or hold the business hostage. In short, it can serve as a legal safety net that helps preserve both the family bond and the family business.
2. Update Your Estate Planning Docs
Don’t just assume your family automatically and neatly inherits your business. Spell it out in your will. However, I strongly suggest that you consider setting up a living trust to keep things running smoothly when you’re not around. Such a trust can help avoid probate, which means fewer delays and a lot less stress for your family. If you have small children, a trust can also be essential for ensuring businesses don’t wind up in their hands too soon.
It’s also foreseeable that you may have health issues while you’re still in control of the business. A durable power of attorney appoints someone you trust to handle finances and day-to-day decisions if you’re incapacitated. Without it, your family could be stuck in court just to access business accounts or sign contracts.
3. Fund the Transition
Covering taxes, debts, and operating costs after you’re gone can overwhelm even the most prepared family. Life insurance can provide a financial safety net, so your spouse and kids don’t end up underwater just to keep the doors open.
4. Communicate Your Plans
Estate planning isn’t a secret mission. Sit down with family members—especially your designated successor—and talk through the plan. Let them ask questions and voice concerns. Trust me, you want everyone on board (hopefully) before you’re out of the picture.
The whole point of building a family business is to hand it down to, well, your family. So do yourself—and them—a favor: plan ahead, put it in writing, and keep it in the family.