Kids Who Won’t Mind Their Business!

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When eating an apple, the only thing worse than finding a worm… is finding half of a worm!
 
For a business-owning parent, the only thing worse than having no kids interested in the succession of the company is when only half the kids are interested in carrying on and inheriting the family store.
 
Consider several scenarios you should address with clients before a life change forces decisions without the time or necessary pre-understandings for proper resolution:
  • If the kids are all uninterested – Begin discussions of the best way to transition ownership to outside the family.A keyperson buy-out arrangement funded with life insurance on the parent is a common arrangement.
  • If only some of the kids are involved and interested – The goal here is estate equalization.To prevent involvement of non-participating siblings, life insurance is often purchased on the parents to provide funds for the bequests to those who won’t inherit any of the family business.
  • A surviving spouse – A non-participating husband or wife left behind that still depends on equity distributions must not be overlooked.Life insurance can be purchased on the parent operating the business that allows children to purchase the business from the surviving spouse.
  • Non-family owners in the mix – A parent who is not a sole owner may want his or her share to go to participating children first.This requires a two-tiered buy-sell agreement giving the children a right-of-first-refusal to purchase or inherit a parent’s interest before non-family owners have a right to purchase.
An attorney will be needed to advise and properly draft the legal documentation. But you can make clients aware of potential problems and initiate serious thinking toward steps to plan properly.
 
Any frustrated homemaker will tell you, “Cleaning your house while your kids are still growing up is like shoveling the sidewalk before it stops snowing.” And so, it might seem to attempt succession planning when everyone is fine and business is going-and-blowing, but it eliminates heavy lifting down the road.
 
For help in getting family business owners to start shoveling the walk now, we will review existing documents and get on the phone with you, your clients, and their advisors to help get discussions started. Contact Tom Virkler, JD – Director of Advanced Markets, at 706-614-3796 or tom@cpsadvancedmarkets.com.