Everyone has been talking about Queen Elizabeth’s passing – wasn’t she supposed to live forever? Luckily, she knew better and had a plan! We should all heed her example and design a transition plan as robust as hers to pass our family enterprise.
Want your business to thrive after you? Identify your successor (whether it is your child or an employee) and become his/her mentor.
Queen Elizabeth was the matriarch of a $28 billion family enterprise. How did she plan for it’s transition? Well, to start off, she trained her son, Prince Charles, to take on her duties. The most important element in a business transition plan is to plan for how the business will continue after the death, disability, or retirement of its leader(s). In her case, Prince Charles was groomed his entire life to take over the monarchy. In our modest real-life family enterprises, we may think of requiring our children to work outside of the business for a number of years, obtain a college degree, and begin working in the family business to grow and learn the ins and outs of running your family business. It is not about giving away our life’s work to our children or forcing them to continue the business you created. It's about assisting them to learn and build their own unique skills. Then letting them take the reins of their future and figure out how those skills can be utilized to grow the family enterprise. Equally important is, once they’re ready, allow and encourage your children to engage and make decisions for the company. In other words, allow your children to act like an owner. Failure to pass the baton to the next generation before the senior generation has actually passed away is detrimental both to the family and the business.
Create a plan to handle the immediate post-death administration and costs.
What happens upon your death? Queen Elizabeth had planned her farewell and burial. She even named her plan “Operation London Bridge”! One message to the Prime Minister and the Operation was set in motion. The key here is to leave a legacy of ease for our family members. They will be grieving; they may even feel lost if your death is sudden and unexpected. Your family will appreciate it if you leave a plan in place and have provided guidance regarding your memorial service, burial, obituary, etc.
What about your assets?
How will your assets be distributed? With no plan in place, the State will choose for you. If the State chooses, you are guaranteed to leave a mess for your loved ones to deal with. Instead, create a plan that includes provisions for leaving money earmarked to cover expenses such as the maintenance of your household; provide guidelines for how to manage your business; have a written agreement delineating the transfer of your business interests (management and economic); and outline how your beneficiaries will receive your assets, and how your legacy will be administered. This is imperative even if your bank account has just a few zero’s. Why? Bank accounts are frozen upon your death. Assets are frozen. If your family has few assets, how and who will cover funeral expenses, the electric bill, hospital bills, etc.? Do you have life insurance? How are your assets titled? Will your family continue to receive money from the business if you’re gone? Will your family have enough money to cover their basic expenses for at least a year? An unplanned succession process can tear apart even the most tightly knit families.
Queen Elizabeth set aside $100 million to cover those expenses. Your family is not likely to need that much, but make sure you provide your family with a source of funds to sustain your business and legacy assets as well as their basic needs (be it through life insurance or a reserve fund.)
Although not directly related to Queen Elizabeth’s bloodline, do you have a blended family? Who will inherit your separate assets? With no plan, those assets may end up outside your family bloodline.
How about estate taxes? Estate taxes are currently a whopping 40%! And although most of us, mere mortals, would not be affected by the current exemption of $12 million, business owners are more likely to feel that pain. And come 2026, this exemption is expected to drop significantly, affecting even more Americans. Since none of us enjoy Queen Elizabeth heir’s windfall, her estate is exempt from estate taxes, we are best served by planning ahead. A comprehensive plan can help you avoid estate taxes.
May Queen Elizabeth rest in peace, and may we take one more lesson from her well lived life.