Inside Out: Rethinking estate planning for family businesses

A perennial topic from a new perspective. Read Roy P. Kozupsky’s (Smith, Gambrell & Russell, LLP,) and Amy Renkert-Thomas’ (Withers Consulting Group) blog “Inside Out: Rethinking estate planning for family businesses.”


Much has been written about estate planning over the years, but in this blog we want to focus on expanding the advisory team.

Helping a family wade through the myriad issues it faces in trying to sustain a business enterprise past even one generation certainly requires good estate tax planning – not adequately preparing for estate taxes can threaten or force the sale of a business. Unfortunately, consumer-driven decisions about which advisory services to purchase in this process lead many business families to fall prey to a far too narrow definition of “estate planning” and an even narrower definition as to which advisors might be in the best position to assist a family in navigating through the succession planning process for its family enterprise.

The key to enhancing the successful transition of any family enterprise is vision and preparation, and the odds can be improved significantly by expanding the advisory team to include specialists in family relations and governance. This requires a deep commitment to creating an atmosphere of trust in which both the family and the advisor team understand the value of collaboration.

All too often, though, collaborative endeavors fail to take root in the estate planning process. Our hunch is that families don’t think about expanding the advisor team mainly because of cost and also because they have rarely seen it utilized or offered as a comprehensive service. While families are used to paying for advice, they are not used to having succession and estate plans reviewed by different professionals who might have different values, skills and perspectives to add to the planning process. So, education about this is key, and not just for families: educating both the family and the advisors right from the inception of an engagement about the need and value of professional collaboration is an important process (and a challenging endeavor) in itself and will hopefully steer the professionals away from their natural tendency of working alone with clients.

Estate planning is intended to prevent a number of undeniably bad outcomes at a critical moment in time – a large tax bill or a claim by an angry creditor, such as a divorcing spouse. By contrast, the human and financial consequences of estate planning transfers of control will linger over decades and generations. Succession planning for family businesses needs to be turned right side out. When there is a team of skilled advisors working alongside the estate planner and founder who can help the family think more deeply about the future of the family and the business, the odds of long-term success will increase exponentially.

This blog is based on a longer article of the same title that can be read here.

About the contributors

Roy Kozupsky, ACFWA, is a partner and the head of the private client department in the New York City offices of Smith, Gambrell & Russell, LLP. He can be reached at [email protected].

 

 

 

Amy Renkert-Thomas is co-founder of Withers Consulting Group, where she works with families and enterprises of all shapes and sizes, from large multi-generational families with highly sophisticated business and investment structures, to entrepreneurs coping with the consequences of liquidity events. Amy can be reached at [email protected].