Estate planning often requires a successful transfer of a Florida business that some heirs may not wish to take over and manage. An heir’s reluctance to manage a business may result from unfamiliarity with the technology, a lack of training or simply not wanting to take on additional responsibilities.
As reported by Forbes magazine, a 2016 survey revealed that only about 52% of family businesses expect to transfer ownership to someone within the family in five years. The other survey participants disclosed that family members would take over key roles after a transfer. Reportedly, a loss of interest by younger generations contributes to heirs not wanting to take control of the family business.
Keeping a business in operation
Determining an heir’s intentions in advance regarding ownership of a family business and management could help in deciding an organization’s future. Existing partners, clients and creditors may benefit from knowing how a business will remain in operation after its owner retires or passes away. By including business succession as part of an overall estate planning strategy, an executor may prepare and help ensure a smooth management and ownership transition.
Determining who will manage the business
A business owner’s awareness of which heirs have a genuine interest in managing the company could help allow for ample training and a smoother succession process. It may also provide a more realistic idea of the amount of time and resources to devote to ensuring that the next generation is ready and capable of running the business.
With a hands-on transfer approach, an owner may help reduce the possibility of contention between heirs. Seeing the new generation take on management responsibilities ahead of time may also serve to eliminate a disinterested heir’s unfounded expectation of inheriting a family business.
Creating a trust to help ensure a business stays on course
Family members often hold shares representing their ownership in the business. They may also have different opinions regarding the direction the family business should take. Creating a trust may help to ensure that a business continues in the manner the trust’s originator intended.