Family Affair: The Emotional Issues of Succession Planning

Nawrocki, Tom
July 2005
Journal of Financial Planning;Jul2005, Vol. 18 Issue 7, p34
Academic Journal
This article examines the emotional issues of succession planning. Probably the most difficult situation to deal with is one in which the owner has children, some of whom are active in the business and some of whom are not. Herbert Daroff of Baystate Financial Services in Boston, Massachusetts said that treating children equally does not treat them fairly. A parent may be inclined to try to leave each of his or her children an equal amount of money or equity, but that can end up ill-serving both the family relationship and the business. The S corp, recapitalization of stock and self-canceling installment note are three of the ways to tackle a vital concern to family business owners, when to start the ownership transition. Arranging for succession as early as possible not only can help smooth over bad feelings, it also allows the business owner more time to develop and execute the right plan. Increasing that communication often falls to the financial advisor, who sometimes must play therapist in addition to managing the financial side of things. There is no magic pill for solving succession problems that will satisfy the needs of the business as well as each of the family members involved. INSET: The Ever-Changing Estate Tax.


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