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Estate vs Succession planning

Succession Planning vs. Estate Planning – Why They Are Both Important

Succession Planning vs. Estate Planning – Why They Are Both Important

Vancouver Business Journal

One of the biggest misconceptions is that estate planning and succession planning are one in the same
Succession plans are critical to the sustainability of a business. Even the most successful closely held business owners find succession planning more difficult than other critical business decisions. One of the biggest misconceptions is that estate planning and succession planning are one in the same.Succession planning directly relates to the actual business itself. It is the strategy that will enable it to continue to operate smoothly and effectively as it is passed onto future generations, partners, or successor owners. Estate planning relates to all the assets in an individual’s estate including any ownership interests in closely held businesses.

For succession planning, important questions to consider when developing your succession plan include:

  • Is the business viable into the next generation? If so, do family members not currently in the business intend to join the business and what is their vision? How do their individual visions align with the current vision of the business and other family members interested in the business as well?
  • Should the business be sold to provide liquidity for future financial security?
  • Who will take over running the business if not sold and are they properly qualified and appropriately trained to do so? If not, can they be and how so?

For business success, it is important to promote training and leadership preparation inside the organization and to keep in mind the future needs of the business.

Business succession planning should solidify the continuity structure for your business, whatever your wishes may be, while estate planning allows the opportunity to carry out your wishes for all of your assets (business and otherwise) during your lifetime, during a period of incapacity, and after your death.

Important questions a business owner should consider when developing an estate plan include:

  • What are the individual’s sources of wealth (all types of assets) and their potential estate tax exposure?
  • How does the individual define financial security and how much of their current wealth is below or in excess of that amount?
  • Are any insurance and investment portfolios owned? Can they be used as liquidity to pay estate tax liabilities?
  • What is the plan for final health care directives, funeral costs, and a distribution of the assets?

Estate planning also has the capability of reducing exposure to estate and other taxes, arranging for professional investment management for yourself or future generations, and bypassing probate.

Not surprisingly, conversations about ownership, wealth, and responsibility of the family and key business personnel could be awkward and can lead to disagreements within the family and/or owners. Without consideration of a complete plan that includes both a succession plan for the business and an estate plan, serious financial and emotional consequences can affect your family business.

For example, if the issue of estate equalization among all family members is a priority of the business owner, the succession plan and the estate plan must be coordinated. If the estate plan leaves the business to those children who are involved in the business, then the plan must provide how the uninvolved children will receive their “share” of the estate. If the estate is subject to estate taxes and a plan has not been made to provide liquidity for payment of taxes, the results could leave the uninvolved children with no assets while the involved children receive the business; or the business may have to be sold to pay the taxes and the business owner’s succession plan is thwarted.

Lack of a succession plan can result in (i) unclear direction for the business without a known leader; (ii) loss of employee faith in company leadership; (iii) power struggles among middle management; (iv) family units broken apart over disagreements; and (v) a potential loss in value due to a key person discount when surviving shareholders go to sell the business.

Lack of estate planning often results in (i) unforeseen estate tax liability; (ii) probate court costs; (iii) delay in distribution of assets and resolution of the estate; and (iv) potential litigation costs associated with the disagreements among living family members.

If you own a business, both types of planning are essential to help to streamline the transfer of your assets, to maximize family harmony, and ultimately to protect the legacy you’ve worked hard to create. The old adage “don’t put off until tomorrow what you can do today” perfectly applies to business succession and estate planning.

This article summarizes aspects of the law.  It does not constitute legal advice nor does it create an attorney client relationship.  For legal advice for your situation, you should contact an attorney.

Read more related articles here:

Estate Planning vs. Succession Planning – What’s the Difference and Why Are They Important?

Legal Corner: What’s the difference between a succession and an estate plan?

Also, read one of our previous Blogs here:

Business Succession Planning: 5 Ways to Transfer Ownership Of Your Business

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Estate Battle with Millions at Stake in New Orleans

Estate Battle with Millions at Stake in New Orleans

Jessica Fussell Brandt filed an eviction petition against her daughter, Julie Hartline, her son-in-law Darryl Hartline and two grandchildren, Alexis and Zachary Hartline. She is pitted against them in a legal fight over an estate valued at more than $300 million, reports nola.com in the article “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound.”

Before auto magnate Ray Brandt died at age 72 from pancreatic cancer, the entire family shared a compound that includes two mansions located next to the Metairie Country Club. Brandt has been trying to sell the property which belongs to the estate, as its executrix. The family members living there don’t want to move, even taking down “For Sale” signs from the lawn.

Her attempt to evict them comes after she won a case in her attempt to maintain control of her late husband’s estate, which includes a large number of auto dealerships and collision centers across Louisiana and Mississippi.

On January 25, a Jefferson Parish judge invalidated the last will and testament that Ray Brandt signed just weeks before his death and another last will drafted in 2015. The district judge ruled that both last wills contained a flaw in how they were notarized: neither notarization specified that Ray Brandt, the witnesses, and the notary were together when it was signed.

The decision is being appealed, but it appears to leave the fate of Brandt’s empire to a last will he made in 2010. Unlike the others, this last will places Jessica Brandt in full control of his estate and trust, including the auto dealerships, until her death.

Ultimately, Ray Brandt directed that her grandchildren, who he legally adopted as adults before he died, would split the estate’s assets.

Despite issuing a statement saying that Jessica was “pleased with the prospect beginning the healing process,” after the Jefferson Parish decision, the eviction filing revealed that Jessica’s attorneys sent an email urging family members to leave the property by January 31, 2021.

Jessica made a statement that her wish to evict family members was a result of the multiple citations issued by Jefferson Parish for continuing violations at the compound. The latest one was for a trailer and mud buggy parked in a driveway on a vacant lot. She also said that the family members own two other homes, one in Metairie and one in Fort Beauregard.

The compound where the family settled seven years ago is estimated to be worth more than $8 million.

The heart of the dispute pits Jessica Brandt against Archbishop Rummel High School principal Marc Milano, who Ray Brandt named as a trustee to oversee the auto group and the rest of the estate until Jessica Brandt dies. Milano has accused Jessica of taking money from the estate and trying to claim an ownership interest in the dealership. She sued him for defamation.

Now the grandchildren have filed their own legal action, challenging a petition to put Ray Brandt’s last will into effect. Their argument is the trust that Ray Brandt set up in 2015 makes it clear that he meant for Milano to oversee the assets.

This estate battle will no doubt keep the Jefferson Parish courts and newspapers busy for some time. It’s a lesson to keep your family’s business private, by ensuring that your estate plan is properly prepared and up to date.

Reference: nola.com (Feb. 3, 2021) “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound”

Read more related articles at:

Fate of Ray Brandt’s auto empire in doubt amid roiling family squabble over estate

‘Stop all of this!’ Ray Brandt’s widow bemoans the family battle over his massive estate

In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound

Also, read one of our previous Blogs at:

Celebrity Estates: Battle Over Inheritances

Click here to check out our On Demand Video about Estate Planning.

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