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Good Questions Trump Right Answers

March 20, 2013
By: Kevin Spafford, Farm Journal Columnist

Kevin SpaffordOwnership is hard. It requires the ability to accept responsibility, make decisions and commit resources. If you don’t like hard work, risk, working with others in a team or accountability, don’t become an owner.

For most families, the succession planning conversation will involve issues such as equal versus fair, decision-making authority and fair pay. These pervasive topics can have a paralyzing effect in achieving a successful outcome.

But the answers to an owner’s concerns may be simpler than you think. Although each situation is unique, there are a number of factors most owners will need to consider.

The following 10 questions may help align your goals:

1. Do you have sufficient resources to fund retirement if the business is transferred during your lifetime?

  • If not, you may need to retain a business interest, receive some income in return for equity or both.

2. Do you want the active children to receive the business in case of premature death (before retirement)?

  • If so, are sufficient resources available to provide financial security for your spouse and dependents?
  • If not, you may consider a sale or redemption of the business in case of premature death.

3. Will a transfer of the business to the active children create conflict among the children if the inactive children do not receive a share of your wealth until the estate is settled?

  • If so, you may consider transferring ownership to the active children and other assets to the inactive children at the same time.
  • Alternatively, you may consider allowing the active children to purchase ownership on favorable terms.

4. If there are multiple children who are active in the business, are they capable of working harmoniously with each other?

  • Or, will it be necessary to transfer a controlling interest to one?

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