Succession Planning Secrets: How to Ensure Your Family’s Future without the HBO Show Chaos
By JoAnna Fellon, Partner, National Leader - Private Client Services & Sam Saunders, Senior Manager, Private Client Services
If you are familiar with the popular HBO series Succession, then you know how messy and dysfunctional things can get without proper planning and the right advisors to guide the family through a transition of your business or wealth in general.
Succession is about a fictional family headed by a patriarch who built a multibillion-dollar family business, is on his third marriage, and has four children, three of which end up working for the family business.
In the show’s first episode, the family patriarch reverses a decision to retire and hand the reigns to one of his children, then promptly has a stroke. Although he quickly recovered, that incident led to ongoing questions about his mental competency. What happens afterward is a made-for-TV drama with family squabbles and power struggles at every turn.
Unfortunately, we see this situation play out in real life more often than not, and while it’s not always avoidable, there are a few ways you can help prevent this outcome.
Communication Through Formal and Structured Family Meetings
The easiest way to avoid discord during a family business transition (or your wealth in general), whether during your lifetime or after your death, is to clearly communicate your intentions and desires to your family before any transition or death. This conversation can be challenging, and a vast majority of people continuously put it off and don’t want to accept that, at some point in the future, they will no longer be able to run the business. This is true for both business succession planning and general estate planning.
You have likely spent your entire life building your family business and wealth. Along the way, you probably gathered a team of trusted advisors (accountants, lawyers, consultants, and financial advisors) to help you along that journey. In addition to preparing a tax return, providing legal advice, or trading stocks, they probably also advised you on a vast array of other issues based on their experiences personally or from servicing other clients. If you have not already assembled a team of trusted advisors, we recommend you start building one now. At Marcum LLP, we develop a relationship with our clients and their other advisors to ensure everyone is on the same page and works together as an integrated team. These same trusted advisors can be helpful intermediaries for difficult decisions and conversations with loved ones related to the transition of your business and wealth.
Once you have your team of advisors in place and have come up with your transition plan, one of the best ways to communicate this plan is to have a family meeting with your team of advisors present. Depending on your circumstances, this family meeting may need to be an annual affair. This may sound over the top at first, but having this meeting and including your advisors can help you:
- Create formalized plans that follow a specific structure;
- Keep the meeting on task by allowing a third party the opportunity to lead;
- Address questions and complex tax and legal nuances about your transition plan;
- Consider non-tax/legal decisions in structuring the transition plan;
- Preemptively address possible points of contention related to your decisions, with help from a neutral third party; and
- Make sure everything is transparently communicated to the family.
This level of structured formal communication and transparency with your family will vastly reduce the possibility of discord and squabbles after the transition. This may seem like a logistical nightmare if family members are spread throughout the country or even abroad. However, an in-person (rather than virtual) meeting is recommended. It can take place during a family ski trip, beach trip, or another gathering of your choosing.
Provide an opportunity to bring everyone together and create another memorable experience with your family. If you are worried that some family members are too busy or may be hesitant to attend the trip and family meeting, you could offer to pay them an actual “allowance” for attending (using the annual gift tax exclusion per person, which is now $17,000 per year. This would be income tax-free to them). Marcum’s Family Office Services group often works with families to assist with the planning and logistics of putting together a family trip for the annual family meeting.
Additionally, if you are charitably inclined and want to instill that same stewardship mentality with the next generation and beyond, an annual family meeting can be a great time to accomplish that. You can provide each family member with a “charitable allowance” and give them the opportunity to choose a cause or organization they think most deserves a charitable donation. This gives them a sense of autonomy to decide while reinforcing your desire to help others for generations to come. It also provides an additional and non-contentious opportunity to learn more about what issues are important to each family member.
Planning for Incompetency
These are a few of the basic legal documents available to avoid some of the more complicated issues that could arise in the wake of the unforeseen or unthinkable:1
- A will (which should be revisited and updated periodically as your circumstances change);
- A revocable trust (with a successor trustee who is authorized to handle your financial affairs using assets that are inside of the trust);
- Power of attorney (this allows someone else to act on your behalf to handle your affairs while you are incompetent. They may also handle various situations unrelated to healthcare, such as managing your general and financial affairs for assets outside of the revocable trust).
- Healthcare power of attorney (like the above but related to medical decisions and may be needed to meet HIPPA requirements); and
- A living will (gives directives on how you want things to be handled if you are on life support with little to no chance of recovery or in a vegetative state).
In addition to these legal documents, it is essential to ensure that whomever you designate to make these important financial and health decisions on your behalf has access to these documents and other necessary information. This includes a list of bank and investment accounts, who to contact in various situations for additional information, passwords to online accounts, etc. Marcum’s Family Office Services group can also help you with this challenging task by compiling all the necessary information and documents in one place. We ensure this Lifebook is available and accessible if the unforeseen or unthinkable happens.
As depicted in HBO’s Succession, a sudden unforeseen health event or accident could cost you your ability to make decisions or handle your affairs temporarily—or longer. Most people don’t want to face this reality and believe it will not happen to them. However, there are ways to plan for and mitigate potential issues. Some of these issues are easier to solve than others. Still, without prior planning and consideration, things can get complicated very quickly, which may impose an unnecessary and preventable burden on your loved ones.
- Each state has various and specific rules that cover these types of legal documents, with some states combining separate ones into one document, so make sure to discuss these items with your legal advisor.