Create your legacy: Developing a family business succession plan

November 25, 2011

By Laura Raines | Cincinnati Business Courier | November 25, 2011

CINCINNATI | Whether managing a successful career or preparing to start enjoying retirement, having a financial plan in place is essential to creating a lasting and meaningful legacy while protecting the assets you've worked hard to gain. While it is often challenging to think about, the time to consider planning the future of your business and estate is now. The earlier a plan is in place the more time there is to openly discuss your vision for the eventual transfer process with your family.

Research shows that 70 percent of family businesses do not have a succession plan and only seven percent have hired professionals to help manage the complexities involved in planning for the continuation of the business and transfer to the next generation. It can be immensely helpful to have a plan in place to help guide you to the future you visualize for your business.

An effective plan provides many benefits including a smooth transition of ownership while minimizing transfer taxes and securing financial security for you and your family. While each business and financial situation is different, meeting with a professional can help with identifying, developing and executing solutions that work. There are five key strategies that help business owners develop and implement effective business and wealth transfer plans:

1. Determine your long-term goals for the business:

Share your goals and wishes with trusted third-party advisors (attorneys, financial planners, accountants). When it comes to the future of your business, it's important you select a partner who understands your direction, objectives and financial needs. An outside advisor can help you manage any challenging issues or family disagreements that may arise.

2. Understanding each family member's plan and wishes:

Sit down with your family and openly discuss the future of the company. Is one child more actively involved in the business than another? Does your family share your vision and goals? Communication is key. You may consider scheduling a yearly meeting with your family to share updates, discuss changes and get their feedback as well.

3. Identifying the next generation of leadership:

There are many factors that come into play when preparing to transfer your company and its assets. It's important to understand if your child(ren) will be able to take on all of the responsibilities associated with owning a business. For example, who will manage the business may differ from who will own it. Ownership could remain with a family member, while a key non-family member could manage the day-to-day operations.

4. Create a transfer strategy:

Determine how you will effectively transfer the business to the new owner(s). How will you sell the business? Will it be evenly divided among your children? It is possible (and legal) that one child will receive a larger share based on their activity and interest in the company.

5. Prepare a proper estate plan:

Estate taxes can be costly so it's important you have a plan in place as early as possible. There are a number of gifting strategies that can help minimize taxes including establishing trusts, charitable gifts, annual gifts and tax-exempted gifts. Work with a financial professional to ensure your gift strategy is appropriately stated in your estate plan.

Family business succession planning doesn't come without its challenges, but by involving the right partners including outside counsel, family members and key employees, you can prepare your company for a successful future. The Goering Center for Family and Private Business offers the Next Generation Institute, an eight-step program to prepare both generations for the path to new leadership. Keep in mind, your plan will evolve along the way as needs and goals change. The more prepared you are now, the more prepared you will be when you're ready to hand over your business to the next generation.

For more information, contact Laura Raines with First Financial Wealth Management, a division of First Financial Bank, at

First Financial Wealth Management, a division of First Financial Bank, N.A., provides investment advisory, wealth management and fiduciary services.

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