It's the holiday season, a time for family togetherness,
Christmas cheer and succession planning?
While it's not exactly a Norman Rockwell moment, financial
officials say any time the whole family comes together provides an
opportunity for business owners -- with an eye towards the looming
tax season -- to make plans that will lessen the impact of the
estate tax on their heirs.
The first step in that process is naming a successor. But that's
not as easy as it sounds.
"They've got to think in terms of `who is the best person to
succeed us in running the business?'" said Ben Byers, manager of
Bank of Oklahoma's Personal Trust Department in Oklahoma City.
"Is it the oldest son? Is it the smartest son or son-in-law or
daughter? Or what do you do with the people, with the kids that are
running the business, involved in the business, and those who
aren't? And how do you be fair about that? So succession planning
forces some business owners to face some pretty challenging
Those tough questions make many business owners reluctant to
approach the topic.
"They postpone making those decisions because they don't want to
hurt the feelings of one of the other children," said James R.
Dickson, president of BancTrust, the trust and investment management
division of BancFirst.
The fact that the topic is also associated with one's demise
carries a psychological weight that causes many business owners to
procrastinate. As a result, many entrepreneurs put off until
tomorrow the business planning they should have done today. And
that's a big mistake, Dickson said.
"Maybe they have a child, but in the back of their mind they
think that child really hasn't shown an interest in coming into the
business, but yet they're afraid to say that to their child and they
just don't do anything," Dickson said. "And then what happens is
they pass away and there may be substantial estate tax that is due
and (the children) have to liquidate the business just to pay the
estate tax. Everybody loses in that situation."
The issue of succession is a common problem that financial
experts have to deal with when they first meet with a client.
"A lot of times business owners haven't made the kinds of
decisions that they need to make on the succession planning side so
you kind of end up looping back into it," Byers said.
He pointed out that the decision to name an heir isn't set in
concrete and can be altered as circumstances dictate.
"The succession planning is something you need to be on top of as
you go. And that will change," Byers said. "Because there could be a
clear heir apparent to a company and they may decide that `I just
don't want to do this anymore,' or you could have a medical problem. …