Succession Planning – Put it at the top of your to-do list

Succession planning is an important task that we all need to do, whether we’re considering a business, farm or our personal assets. Often, it’s a task that gets pushed aside “for another time”. After all, it’s hard to think about events we hope won’t happen for a very long time into the future. But the reality is, succession planning is something we need to put at the top of our to-do lists.
We recently had a chat with expert consultant, Robin-Lee Norris, to help us – and you – start thinking about succession planning in a meaningful way.


What exactly is succession planning, and why should I care about it?

When I use the term succession planning, I am referring to planning for the transition of responsibility for and/or ownership of assets AND (yes that is a big "and"!) the communication of that plan to the entire family. 
The assets that are most commonly the subject of succession planning are:

  • active businesses, including farm businesses
  • investment portfolios/wealth management
  • family cottages/vacation homes. 
The transfer of any of these assets requires a lot of advanced thought, information gathering, help from advisors and open, transparent discussions with family members to make sure you accomplish what you want.

When should someone start thinking about succession planning?

It is never too early to start the process of succession planning.  Unfortunately, many people wait until an illness or death before acting, which often creates legal, taxation and sometimes family problems. For example, the unexpected death of business owner can result in the business being sold or shutdown if there has been no planning for its continued operation. 
The same can happen with a cottage/vacation home.  Without a plan in place, the resulting taxation on death or arguments between beneficiaries may result in your home being sold - which might be the last thing you want to happen to your property.

What is the biggest misconception/myth you've encountered around succession planning, and what is the true story?

People want to believe that their family members will all get along and honour their wishes, even if there has been no clear succession planning.  The unfortunate reality is if the plan has not been created and communicated, your family members are left to interpret what your wishes were. It’s human nature to make those interpretations based on their own wishes and needs.  We all see life through lenses created by our own experiences. And we are all influenced by the experiences of our own spouses, friends and business associates.  Without a succession plan, chaos could reign between family members.

How long does it take to make succession plan? Is it difficult to develop?

The length of time to create a succession plan is as variable as each individual situation.  There is no one-size fits all approach that will be successful.  It can literally take years to complete if there are significant tax planning steps or legal documentation that must be completed in a specific order.  The amount of time it takes to make a plan is dependent on whether some or all the transition is going to happen during your lifetime, through your estate or a combination of both.

What are the most important elements of a good succession plan?

The most important element in a succession plan is that it truly reflects what YOU consider to be most important. For some, reduction of taxes is paramount.  For others, it is the legacy of keeping the farm or the cottage in the family for future generations.
Some believe equal and/or fair treatment of family members should be the result of a good plan. (Keep in mind that fair and equal are not necessarily the same thing!)  While some people focus on family harmony no matter what the financial cost. 
If you have gone through a rigorous planning process and faced all the elephants hiding in all the corners of your life (most of us have a few), you will most certainly have looked carefully at the importance of all these elements in creating your plan.

So, I've developed a succession plan.... what do I do with it now?

Once you have created a succession plan, you should not stick it on a shelf and forget about it.  It is a living document that needs to be looked at regularly.  Your plan should be used to test decisions you are making. Do they fit the plan you made? If you are changing direction, you need to think about revising the plan.  For example, your plan may be to leave the cottage to one child, the house to another and an investment portfolio to your third child, thinking that all three will be equal assets after the estate pays the taxes triggered by your death. But if the three assets change in value so that they no longer are equal, you need to go back to your plan and consider making a change.  The same kind of re-evaluation would have to occur if you need to sell your business because of health issues, and you need the money from the sale of the business to live since you can no longer work.  The adage "Life happens while you are making plans" is certainly true when applied to succession planning.
 How much does it cost to develop a succession plan?

The cost of succession planning usually involves expert assistance from your lawyers, accountants and financial advisors. Costs can be reduced if you do some work in advance. Do some genuine fact gathering as well as listening to, observing the actions of and communicating with your family. Why is this advance-work important? Jumping straight into a tax driven plan or planning based on emotion without honestly looking at capability or wishes of your family can have unintended financial or family harmony consequences.  Even worse, the cost of not planning at all can be devastating.

What are your most important tips about succession planning?

The best tip I can give everyone, is make planning a priority and put it on the list to start now.  It does not all have to been done at once, so don't let yourself be overwhelmed.
After an initial meeting with you, a consultant like myself can give you a list of things you can tackle yourself, one at a time, that will start the succession planning process and help you be clearer on what your choices are. 
I recognize that it is hard to be objective about your own family, so I can help you with the tough conversations.  In the end you will be able to communicate more efficiently and successfully with your legal, accounting and financial advisors about your wishes.  They in turn will be able to give you the best advice on how to incorporate those wishes in a succession planning.

Robin-Lee Norris is a consultant who has retired from the practice of law.  She has a passion for helping people prepare for the future, and now operates Robin-Lee Norris & Associates – a consultant firm that specializes in dispute resolution and succession planning services for businesses and individuals.