My father is in his 60s. He is vigorous and still fully in
charge of the family business he inherited from his father about 20 years ago.
But as far as I know, he has made no plans about who will take over the business
when he retires or passes. There are three children in the family to consider
(and we all might be interested); the other option is to bring in an outsider to
succeed him. I just want to maintain the health of the business, and my future
stake in it. In any case, shouldn’t my father have made plans at this point? How
can I raise this subject with him in a useful way? Failing to plan for business succession—and adequately train successors—is the reason only approximately
one-third of family businesses successfully transfer from one generation to the
next. Reasons for this failure are legion:
• No one can do it as well. (At some point, "they" will have
to.)
• It’s not time. (When will it be?)
• I’m too busy running the business. (Truly successful
business leaders identify and train a successor.) The question of how to get your dad to recognize the need for
this discussion is a common dilemma, but the fact that you acknowledge the need
for this discussion is a very good first step. Perhaps your mother or a trusted
advisor can address the issue with him. You and your siblings may have to join
together to raise the issue in a family setting. Your father won’t suddenly find
himself without something to do. Rather, successful successions are generally
staged over a number of years, with built-in contingencies in the event of
unusual circumstances. However you choose to initiate the process, I urge you to begin
your course of action within the coming year. Otherwise, the business will
likely fail to be among the very few organizations that are passed successfully
to the third generation.
Edward F. Koren, Holland & Knight, Tampa The old adage "one does not plan to fail, but fails to plan" holds especially true in succession planning
with a family business. Your question raises many issues that you should
examine. Does your father have a testamentary estate plan? Does the estate plan
take into account the family business? If so, what are the implications for
succession planning and family finances? Have the children been involved in the
business? Who are the trusted advisors involved with the planning? The answers
to these questions are essential background to any succession-plan
discussion. Dialogue about the succession plan depends on the family relationships. In an open relationship, you can ask direct questions about the
impact of your dad retiring (or passing away). The best practice is to have a
succession plan in place that is fully integrated with an estate plan. This
should address disposition of assets and estate tax minimization through
lifetime gift and sale strategies, all of which are consistent with the family’s
ownership and economic objectives. The plan can evolve over time, as you may
need to revise it. Although in the past it was uncommon for parents to discuss
testamentary plans, today it is becoming an accepted and proactive practice. My
experience has been that if a family can gather to discuss the disposition of
assets, then a smooth transition can take place during your dad’s life.
Domingo P. Such III, McDermott Will & Emery, Chicago
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