You might be surprised to learn that you have an estate—at least you do if you have:

• investments,
• a house,
• a car, or
• a savings account.

Don’t have any of those? How about personal possessions? If you have clothes on your back, you have an estate.

We all want to know that our wealth—whether that’s an investment account or a beloved collection of dog-eared books—will go to the right people when we’re gone.

At its most basic, that means having a will that tells your loved ones who should receive which possessions, and when they should receive them. This includes the classic stuff you think of in a will—“my book collection I leave to my brother, the avid reader; my investments, to my husband; my heirloom jewelry, to my daughters” and so on.

But, there’s much more to an estate plan than just “who gets what.” You want to rest assured that your loved ones will be cared for, that your wishes for medical care will be followed to the “T.”

Other components of your estate plan

To that end, your estate planning may include several aspects:

• A financial plan, to ensure your surviving family members are taken care of after you’re gone. This often includes life insurance, which can protect your family from lost income if you become disabled, or pay to support your family after you pass away.
• Tax planning, aimed at preventing your family from paying too much in taxes on your estate (without such planning, the government could take as much as 35% of your estate!).
• A sale or succession plan (if you own a business), ensuring that the company can thrive in your absence.
• Providing for minor children, in the form of guardianship, as well as someone appointed to manage their inheritance until they come of age.

There’s another aspect of estate planning that is often overlooked: planning for medical care. Depending on your situation, that may mean purchasing long-term care insurance, establishing a health care proxy able to make decisions on your behalf, and more. When it comes to your care in old age or disability, most people feel very strongly. By leaving instructions for your family, you can make sure your wishes are carried out.

What happens if you don’t have an estate plan?

As you can imagine, it’s critically important that most of this planning are put in place long before you need it. Some things simply can’t be planned for—unexpected death or sudden disability can strike without provocation. By planning early—just in case—you can spare those you love both the expense and frustration caused by a poorly planned estate.

If you die or become disabled without a solid estate plan in place, the state will intervene. For instance, if you die without a will, the state will divide your wealth between your spouse and children—and they may not get the share you would want. Likewise, the state would control a minor’s inheritance.

The government’s control of your wealth is frustrating enough in life—you don’t want them in charge of your estate when you’re gone!

Now is the best time to get started.

None of this is fun to think about—most people find estate planning even less exciting than preparing taxes. But, like responsibly dealing with your taxes, an estate plan is necessary for the sake of your family. And, like your taxes, there’s great help available. The best estate planning firms are able to be sensitive to your wishes and suggest solutions that you may not have though of. An estate planner can remove most of the burden from you, and give you the peace of mind that your intentions will be honored.

The post Who needs estate planning? appeared first on Law Offices of Kevin Van Horn.

The reality, though, is less encouraging. According to the Family Business Institute, only 30% of family businesses survive into the second generation—most often due to a failure in the succession planning process on the part of the business owner.

In many ways, your succession plan is like a will for your business. No one wants to dwell on thoughts of when they’re gone, but doing so is necessary to care for the ones we love—including the business you’ve poured your energy into.

In the worst cases, I’ve seen ineffective and unrealistic succession plans result in infighting amongst families, and even the liquidation or collapse of businesses.

In the best cases, I’ve seen families spring into action, with each person knowing their new role, and the business running as strong as ever. (…And the IRS failing to take more than is owed by law.)

Why succession plans fail (and cause businesses to fail)

There are a few problems I see small business owners run into time and again.

One of the biggest is objectivity. I talk with owners all the time who “know” that their son (who has only briefly worked as a manager) has what it takes to guide the company in the future, or they “know” that their daughter will take over their leadership role.

“Have you asked your daughter if she wants to take over for you?” I ask.

“Well, I don’t have to!” my client says.

That’s the start of a difficult conversation, to say the least.

Preparing your child (or sibling, or partner) for a role they don’t want is a recipe for disaster. They conversations may be tough—acknowledging that someone isn’t, in fact, fit for a leadership role can be heartbreakingly painful—but in the end, no one is served by an unrealistic plan.

Strong communication can soften these blows. Make sure you know all the stakeholders in these decisions. While you might have the last word, your choices will affect your loved ones for many years to come, from your spouse to your children to your employees.

The last thing you want is for your loved ones to be surprised at your decisions—especially once you’re gone. By sharing your thought processes, and seeking open feedback from your family, you can make sure that you don’t blindside someone with a role they don’t want or aren’t ready for… and ensure you aren’t blindsided either.

Keys to an effective succession plan

With that in mind, there are a few aspects that great succession plans have in common.

Plan early

The first is an early start—in fact, the sooner you begin this process, the better.

By planning for your succession long before you may need to, you’ll have much greater flexibility. Depending on your situation, you may be able to transfer ownership of the business to your children and thereby avoid an unnecessary estate tax, or you may decide to slowly transition new leaders, managers, or employees in to the business.

Train your key players

Planning far in advance allows you to ensure that your plan is much more than just a list of names and roles. For that reason, I’ve heard it called succession development rather than planning—the idea being that you want to make sure key people can grow into their upcoming roles, rather than being thrust into them.

Think of it like a football game—you don’t wait until your starting quarterback is injured to have your backup go suit up. No, you want his replacement not just dressed out and sitting on the bench, you want him to be well-trained, warmed up, and excited to get in the game.

Focus on 3 roles

As you think about the business after you’ve stepped down, there are 3 roles that will need to be addressed in every business—ownership, leadership, and management.

For closely-held, family businesses, ownership almost always transfers to one’s children (often split between many children).

Leadership, on the other hand, may go to a partner or trusted employee, depending on the capabilities and wishes of one’s family. (Remember how important it is to be honest, and to solicit honest feedback?)

Management often must change with the leadership, as the most experienced managers are promoted. Who will replace the new leadership in their previous roles? Often your current managers can identify their best replacements from within.

Involve your accountant & attorney

While much of your succession plan has to come from you—your decisions and your wishes about the future of the company—there are a lot of aspects that require outside help.

When it comes to transfer of ownership, tax planning, and legal issues that might arise, listen to the advice of a trusted accountant and attorney. More often than not, they’ll save you much, much more than they cost you.

Case in point: the 35% estate tax. If your personal assets (including life insurance benefits paid on death) and business valuation together exceed about $5.1 million, your family will be responsible for at least $1,780,000 in taxes. If they don’t have that kind of cash on hand, they may need to liquidate your company just to pay the taxes on it!

With smart planning, though, these kinds of problems can be headed off long in advance.

Don’t put it off

Ready to get started on your succession plan? Drop your email address below to receive our free guide to 20 essential questions to ask your family before creating your succession plan.

The post Succession Planning for Your Family Business: Start Preparing Now! appeared first on Law Offices of Kevin Van Horn.

This is what bold looks like, and italics are like this. This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is a block-quote, which you might use for pull-quotes or other varieties of big, important quotations.

—John Doe, dummy text author

You could edit this post to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is an example of a WordPress post.

You can create as many posts like this one as you like and manage all of your content inside of WordPress. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like and manage all of your content inside of WordPress.

An unordered (bulleted) list looks like this:

• The first element in an unordered (bulleted list).
• The second element.
• A third, for good measure.

The image above is right-aligned. This is its caption.

Another sub-heading

This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress. This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

One last top-level heading

This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is what an ordered (numbered) list looks like:

1. The first step of the process.
2. The second step.
3. The third and final step.

The post Another blog post appeared first on Law Offices of Kevin Van Horn.

This is what bold looks like, and italics are like this. This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is a block-quote, which you might use for pull-quotes or other varieties of big, important quotations.

—John Doe, dummy text author

You could edit this post to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is an example of a WordPress post.

You can create as many posts like this one as you like and manage all of your content inside of WordPress. This is an example of a WordPress post, you could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts as you like and manage all of your content inside of WordPress.

An unordered (bulleted) list looks like this:

• The first element in an unordered (bulleted list).
• The second element.
• A third, for good measure.

The image above is right-aligned. This is its caption.

Another sub-heading

This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress. This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

One last top-level heading

This is an example of a WordPress post. You could edit this to put information about yourself or your site so readers know where you are coming from. You can create as many posts like this one as you like and manage all of your content inside of WordPress.

This is what an ordered (numbered) list looks like:

1. The first step of the process.
2. The second step.
3. The third and final step.

The post Our very first blog post, just for you appeared first on Law Offices of Kevin Van Horn.