Succession planning is a big job – it involves family, business and considerations for the future of each, which, on their own, can be daunting. But lack of communication, getting the wrong advice, unrealistic timeframes and the inflexibility of parties can make reaching a resolution tricky.
Being prepared and getting the right advice at the right time can go a long way to ensuring the best outcomes for everyone involved. To help you understand what to watch out for, we’ve highlighted the four most common mistakes we see during the succession planning process.
Four succession planning considerations
- Communication
Opening two-way communications early with your family and professional advisors is key. This means sharing your intentions but also listening to the intentions of your family too. This ensures that all parties are aware that you have a plan in mind and what the goal of that plan is, so that there are no surprises for any of the parties when documents or correspondence is received. For example, you may wish to leave the family farm to one of your children, only to discover that they do not want it.
- Seeking professional advice
It is best to seek advice from your professional advisors when setting up your succession plan. This could be a team of advisors, like your lawyer, accountant, bank manager that can help you set up a plan in a way that best serves your intentions. This helps reduce the chances of issues, conflicts or delays once the plan is in action.
- Realistic timeframes
Setting up a succession plan can take some time, especially if there are multiple parties, business entities and other complexities. Working through these can take months, assuming things go smoothly. Having realistic expectations around time frames and/or allowing enough time to complete settlement will avoid unnecessary stress for all parties.
- Flexibility/openness
While the end goal may be similar for all parties, the journey to get there may look different for each. Therefore, it’s key to maintain some flexibility and an open mind. Without this, matters may be slow or may not progress at all.
When it all comes to a head
An example of these in action: One farmer, one farm, two companies and two sons.
They sought advice from the farmer’s accountant in relation to values, and heads of agreement were prepared and circulated to each party’s solicitor.
The solicitors were able to discuss the agreement with their respective clients, clarify matters with the accountants and work through banking and insurance requirements for their respective clients.
Settlement was to occur within two months for tax purposes which was not sufficient time for the work to be completed. All parties worked together with their advisors and remained flexible on some matters being resolved later due to the short time frame.
The farmer retained a home and financial support for life. One son received the farm and a company while the other received a company and payment.
All matters were settled and finalised within six months of the heads of agreement being received by solicitors.
It shows that communicating early, seeking professional advice, understanding timeframes and being flexible can lead to smooth and relatively painless settlements.
Ready to or already planning for your next step?
We can help you navigate these common issues. Contact our Succession Planning team for support planning your succession.
