Sep 27th

Successful Succession Planning

While the thought of a company leader falling ill or worse is never pleasant, there can be dire consequences for companies that do not have contingency plans in place for such events. The smooth transition of leadership within a company is vital, especially because client needs must continue to be fulfilled and employees still require direction and a leadership team that they can rely on. Lack of preparation for these situations can lead to worse case scenarios, a loss of trust among employees and management, and businesses in these situations often find themselves collapsing inward.

Succession planning has even further consequences, as job loss, company revenue, and culture are all at stake. It is possible that families could lose their livelihoods from a lack of planning ahead.

What can be done then?

At Whittier Trust, we take care to navigate taxes, funding sources, and relationships for clients in order to make the transition of succession run as smoothly as possible.

“We take a comprehensive approach to planning, which is why I think we’re so successful in what we do,” says  Elizabeth Anderson, Vice President at Whittier Trust. “It’s our company mission to help generations of families care for their significant wealth in all sorts of different family and business scenarios. Our model for succession planning is customizable, so families can choose a plan that is right for them.”

What Steps Are Necessary? 

  • Plan early. It is advised that succession planning starts at least 3-5 years before a transition. Circumstances might demand an even longer period of transition time. Consideration should be taken to minimize capital gains taxes and maximize asset protection.
  • Assemble your advisory team. Start with the basics – surround yourself with people who can help you understand the bigger picture and the complexities that business, tax, and wealth management pose. Your team should give you options that best suit your overall objectives.
  • Make a contingency plan.  Making sure your business will run smoothly in an emergency will increase trust and confidence among employees, customers, and potential buyers.
  • Identify your ideal successor.  The person you wish to name as your successor may not be the best choice. You should work with your advisory team to find the best options.
  • Plan for after.  Knowing how you’ll spend your time and what resources you will need during retirement is critical.  To estimate financial needs during retirement, you must know how and where you will be spending your time.
  • Update your personal documents.  It is crucial to meet with your tax advisor, estate planning attorney, and wealth manager before a transition of leadership. Minimizing capital gains taxes and estate taxes while maximizing asset protection and family harmony takes time and planning.
  • Prepare the business.  If you are planning an exit that you hope leads to a high sales price for your business, you may want to bring in experts to help make the company more attractive to buyers.  Making sure the company financials are clean and audit-ready involves more than just following GAAP principles.  Strategies to retain top talent, reduce risk, and add value are some of the priorities you and your advisors should tackle.

If you are planning a family transition, you should focus on the relationships with non-family employees you value the most.  Making them comfortable with the transition is critical.

  • Prepare the family. In the case of a family transition, it is best if your family understands your objectives for the business and how you want those objectives to impact the family.  Clear communication allows family members to focus on a common goal, which builds trust.
  • Consider legacy.  If exiting your business allows you to establish a desired legacy, take the time to consider it.  Share your objectives with family and others who may be carrying your mission forward, so you can be sure that they understand your motivation and have the tools to keep your legacy alive when you are no longer present to do so.

This roadmap provides an overview of several steps we advise proactive owners to undertake as they consider succession planning.

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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