The Importance of Business Succession Planning

Business succession planning is a critical part of estate planning, especially when you plan to use the value of your business to fund your retirement

Business succession planning prepares for a business owner’s retirement or untimely disability or death. Research shows that 78% of small business owners responded that they plan to use the sale of their business to fund their retirement. However, just 25% of private business owners say they have a succession plan in place.

The Houston Business Journal’s recent article, “Three tips to employing establishing a strong succession plan,” takes up this matter for discussion.

Applying proactive business succession planning may help your business successfully move to new leadership and keep operations running smoothly. Here are a few tips for establishing your succession plan.  You can also see here for more information.  https://galligan-law.com/practice-areas/business-succession-planning/

Regardless of whether you’re going with a family member to succeed you or bringing in someone from the outside to take over, it’s important that the plan is communicated beforehand. You don’t want workers speculating or feeling blindsided by the decision.

Be sure that you have legal documents in place and clear expectations, guidelines, and rules, so there aren’t any gray areas when the time of transition comes.  This is essential in business succession planning.  This may come in many forms from traditional estate planning such as Wills or Trusts, and business specific documents such as Buy-Sell Agreements, the documents governing business operation and more.

If you are appointing a family member, set out details on how other family members will contribute to the company if they are interested. You could have more than one family member run the company, but it may be best to have one clear decision maker.  Part of business succession planning is establishing the plan before you stop operating the business yourself.  So, if you are appointing a family member who isn’t currently involved in the business, bring them in early to teach them and familiarize them with the company and its employees and vendors.

If you want to have an outside party come in to run the company or have a longtime employee assume leadership, be open to ideas. Don’t overlook someone who may be a good leader and a good fit for the position. As business climates shift, technologies advance and workplace skills change, make a selection of a leader who can adapt to those changes.  Remember to pick someone who will be in the best position to keep your business profitable, especially if the business will help fund your retirement.

As you work on business succession planning, leverage a team of experts, such as an estate planning lawyer, business lawyer and an accountant. You should also work with a business broker who can provide a realistic valuation of your company.

Reference: Houston Business Journal (September 3, 2019) “Three tips to employing establishing a strong succession plan”

Continue ReadingThe Importance of Business Succession Planning
Read more about the article Probate: Dissolving the Mystery
It is important to understand the probate process before deciding whether and how to avoid it.

Probate: Dissolving the Mystery

probate and estate planning
If you want to avoid probate, work with an experienced attorney to coordinate your plan and assets.

Probate avoidance is a common concern for our clients.  They frequently seek ways to pass their assets to their loved ones without going through probate.  Although it can be avoided with proper estate planning, probate avoidance should be done carefully and at the advice of an attorney as using piecemeal strategies usually don’t work, and sometimes create bigger problems.  For example, consider using trusts in your estate planning.  See this article for more information.  https://galligan-law.com/how-do-trusts-work-in-your-estate-plan/

Before considering whether you want to avoid probate, it is important to understand what the process is.  The Street’s recent article on this subject asks “What Is Probate and How Can You Avoid It?” The article looks at the probate process and tries to put it in real-life terms.

Probate is the process by which an Executor (person put in charge of the Will) goes to court to prove the validity of the Will and their authority to be in charge of the estate.  I find it helpful to remember that the word probate is essentially Latin for “prove it.”

Every state’s process is different, but in Texas, the Executor starts by filing the Will and an application to probate along with other documents necessary to that case.  Next, there is a hearing before a probate judge.  The Executor and her attorney ask the judge to admit the Will to probate as the valid Will of the decedent and ask that the Executor be empowered to handle the decedent’s affairs as directed in the Will.

Once the Will is admitted to probate and the Executor agrees to serve, there are many tasks for them to complete.  They include the following:

  • Giving notice to the beneficiaries in the Will;
  • Giving notice to potential creditors of the estate;
  • Gathering, valuing and categorizing the decedent’s assets;
  • Prepare an inventory of those assets;
  • Paying off any of the deceased’s existing valid debts or fighting invalid ones;
  • Paying final taxes or expenses of the estate; and
  • Distributing the deceased’s property to those directed by the Will

The above are just the basic responsibilities of the Executor.  The probate process becomes more complicated when a creditor appears, the family disagrees, assets are entangled or cumbersome, such as land or business interests, or the Will was written without the aid of an attorney.  Even worse, it is hard for an Executor to locate assets in the first place!  This can make estates drag on months or even years.  I recently spoke with a client whose family is still going through a probate 10 years after the decedent has passed.

With all of that uncertainty, it is worth discussing your wishes with an experienced estate planning attorney who will be able to explain what strategies are used to avoid probate, how to remove certain assets from the process, or whether it needs to be avoided at all.  The key, as with all estate plans, is to find the option that fits your goals for you and your family.

Reference: The Street (July 29, 2019) “What Is Probate and How Can You Avoid It?”

Continue ReadingProbate: Dissolving the Mystery

How to Begin the Estate Planning Process

The estate planning process can be intimidating, but doesn’t have to be.  Start by listing your assets, who they go to and who to put in charge.

The hardest part of the estate planning process is  starting it.  About 17% of adults don’t think they  need  a will, believing that estate planning is only for  the very wealthy. In fact, clients frequently ask  whether they have enough money for an “estate.”    Sometimes they think state law will already directs their assets and they don’t need a plan.

However, the estate planning process is not about how much money someone has.  It is about planning for the assets you have, however much or little that may be, your wishes for those assets, yourself and your family.  It is about empowering you to make the choices you want for you and your family, not leaving it up to the state.  Even completing a few simple documents can make a huge difference in the future.

valuewalk.com’s recent article, “Couples: Here’s How To Start The Estate Planning Process” notes that although the estate planning  process can seem overwhelming, taking inventory of assets is a terrific place to start.

Make a list of all your assets, including confirming how they are titled and whether there are beneficiaries named on the accounts, as well as the general value of the assets. Then, decide who you want to leave these assets to and who should be in charge of the process.  Our firm uses questionnaires as part of the estate planning process to help gather this information so we can focus on the issues most important to you.

Drafting a will or a trust may be the most critical step in the estate planning process. These documents serve as the directions for how assets are to be distributed and who is responsible to do it.  A well-crafted will or trust can simplify the distribution of assets at your death, provide instructions to your family, and avoid disputes, unnecessary taxes and protect your beneficiaries from predators.

Without an estate plan in place, your assets will be distributed according to state law, rather than according to your wishes. Don’t assume state law leaves everything to your spouse!  Many people assume if they are married everything they own goes to their surviving spouse, but in many situations, that isn’t true.  For example, blended families, children outside of the marriage and some non-marital property.  Speak with your estate planning attorney about how these issues impact you.

Once you have an idea of your assets, beneficiaries and who to put in charge, the next step in the estate planning process is to meet with your estate planning attorney to review the information so they can make recommendations on the best way to accomplish your goals and highlight other issues to address.  Our firm offers free estate planning consultations, so please contact us today to start the estate planning process.

Reference: valuewalk.com (July 22, 2019) “Couples: Here’s How To Start The Estate Planning Process”

Continue ReadingHow to Begin the Estate Planning Process