Q: Recently, my husband and I attended a Legacy Project Workshop. We learned a lot about the conversations we need to have, and we’ll hold a family meeting soon. But we walked away a little confused because you didn’t recommend which entity we should use (LLC, corporation, partnership, etc.) and you didn’t tell us the difference between a trust and a will. Where do we go to learn more about the legal parts of planning for succession?
We’ve been to see an attorney, and the appointment turned into a discussion full of legal jargon. For an hour, he talked over our heads, and we felt uncomfortable asking questions. We attended your workshop hoping you’d tell us what we need. We know we should communicate, but we feel like nothing will happen if we don’t know what to do after that.
A: The format of the Legacy Project Workshops is designed to cover the critical aspects of the planning process, offer the appropriate tools to engage in the process and encourage participants to take the next steps. The legal parts of the succession planning process that you asked about come into play in the final stages of planning—during implementation.
During the workshop, I hope you learned that the process of planning is a journey. It starts with encouraging good communication skills and clearly defined objectives. The satisfaction you realize comes from your willingness to face a few sometimes difficult, always uncomfortable, obstacles, such as deciding what is fair and equitable, reconciling active and inactive family members, and deciding between retirement or the next step in your career.
Planning for succession is similar to planning for a long trip to an exciting destination. Most people don’t start planning a vacation with a discussion about gas mileage and tire pressure. They start with a specific destination or a list of places they’d like to see and things they’d like to do.
The Legacy Project Workshops are designed to introduce participants to the comprehensive succession planning process. In the workshops, I focus on removing the mystery, clearing the clutter and defining a simple planning process. Success or failure is rarely the result of your ability to understand legal jargon and income tax strategies. The biggest reasons most people fail are:
- a lack of communication;
- an unwillingness to focus on common objectives;
- a hesitation to face the tough issues: fair and equitable; active versus inactive; and in-laws.
Legal tools and techniques are designed to implement your wishes, not the other way around. All to often, people are convinced they can’t achieve goals that deal with financial constraints, tax strategies and legal maneuvers.
The succession process depends on the family’s ability to master the five keys to planning success: good communication; defining common objectives; the readiness of the family, the operation and the owner; following a planning model; and committing to action and renewal.
Success will first be determined by how well the family communicates throughout the process. In order to move forward, they must be able to discuss their concerns and openly review the pros and cons of various planning solutions.
One of the first steps in the process is defining common goals—objectives that all family members can agree on and work to achieve. Part of the process is facing some of the difficult and uncomfortable issues, like the separate needs of active and inactive family members.
It is important to follow a proven planning process and work within a planning structure. Finally, the family must commit to action and a process of constant renewal. There is nothing more satisfying than implementing a plan that works to achieve the long-term goals of a family business owner.