Closely-held businesses are just not like other assets. You have to think differently about how you are going to pass them along through the family or make other arrangements. In other words, when a family business is part of the mix, you do not have the luxury of mere planning your estate. No, you must plan for the business succession.
What if you do not make plans for your estate or the business? Well, it gets messy. Generally, matters default to the probate court to sort things out. Sometimes this sorting depends on dusty state laws of “intestate succession” that provide a one-size-fits-all plan of distribution based on your “degrees” of family relationships.
In the absence of proper legal planning, the question likely is whether the family (let alone business) will survive the process. For more on this subject, you might want to read a recent article in The New York Times titled “Surviving a Succession Without a Plan.”
The original story is, in many ways, a happy one. The family rises up to reclaim the business and it returns. That said, it is a story of two sisters. While these were very capable sisters, they were never brought up in the business or with the goal of running the business. To save the business, however, these sisters had to fight through an inter-family conflict, a rebellious employee and even a downward dive into the red before finally taking over and saving the business.
Unfortunately, the sisters could have been spared all of this anguish had their father simply created a succession plan.
Reference: The New York Times – You’re The Boss (June 25, 2013) “Surviving a Succession Without a Plan”