Financial Confidence | Estate Planning – We Know We Need It, But How Do We Get Started?
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Estate Planning – We Know We Need It, But How Do We Get Started?

Estate Planning – We Know We Need It, But How Do We Get Started?

If you don’t have an estate plan in place, you’re not alone. About half of family firms don’t have a formal estate plan in place.

Why is estate planning such a difficult process to get started in a family business?

• Some founders feel they are immortal
• Many feel the process is just a formality
• Some feel it’s not a high enough priority at this time
• Many feel it is an event that happens too far in the future
• Others feel estate planning just happens

Estate planning is often regarded as a formality in a family business. Family business owners are often so caught up in the short-term running of their business; they don’t place a high enough priority on long-term issues like estate planning. Especially in a weak economy, many are focused on the survivability of the business short-term. They are more concerned about initiatives that have tangible bottom line benefits. It’s often hard for them to have the discipline to work on long-term family business financial planning issues.

Another reason is by nature, we tend to avoid the difficult issues.

In a family business, the close relationship of the family is one the most important factors in the success of the business. This same closeness can also become a hindrance in the estate planning process.

It often stirs up some of the most sensitive issues of a family business, including:

• Retirement of the senior generation
• Succession planning
• Sibling rivalry
• Family conflict
• Employment of extended families
• Future leadership roles
• Senior generation’s confidence level in next generation leadership

No wonder we avoid the estate planning process, with these sensitive issues being brought out into the open.

One way to approach the process is to do a “flash” estate plan.

By developing a sense of urgency, we often can better understand the importance of long-term financial planning. It helps to move the issue into our short-term thinking. In addition, demonstrating how working on the estate planning process earlier, has financial benefits of protecting the wealth of the family and the business.

One method for doing this is to run through a scenario of what would happen if a key family member passed away. Compare all of the business and family wealth issues with and without an estate plan in place. Family members will quickly realize the financial benefits of having a plan in place. In addition, a bonus benefit of doing this exercise is you may work through some of the key family business issues that you have been avoiding for so long.

Two things that often help to move the estate planning process forward, is realizing the comfort and security of having a plan in place in the event of a crisis, and the understanding that the plan is not a final document and can be modified at any time.

©iStockphoto.com/Jacob Wackehausen
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