Before the owner of a family business can sign the estate planning documents, the estate plan must be drafted. Before it is drafted, it must be designed. Before it is designed, the estate planner must first understand the family and the business. That understanding begins with knowing the goals and objective of the people (stakeholders) within the three sub-systems: family, business and management. The Venn Diagram displayed above is a representation of these sub-systems. One circle represents the family; one the ownership of the business; and, one the management of the business. Knowing where the stakeholders fall within the sub-systems leads to understanding the interplay between and among the sub-systems.
Once the estate planner understands this interplay, the planner can begin to consider the design of a plan that conforms the goals, objectives and needs of those in the sub-systems. The steps the planner will take will include identifying the stakeholders (including the in-laws); determine the needs of each stakeholder (as a group and individually); identify the assets both business and non-business; obtain values of the assets; and, determine with certainty who has title to the assets.
When one of the assets is the family owned business, the planner must determine whether the goal is succession planning (keeping the business in the family) or an exist strategy (liquidating or selling to third parties). The determination requires an analysis of the viability and sustainability of the company and the financial needs of the owner/client. Once the goal for the business is known, the owner must begin to prepare the stakeholders and the business for the succession or for a sale. But the process is not quite over. Before drafting the plan, the planner and the owner should consider alternative and substitute plans in the event that the designed plan is interrupted by events outside the control of either the planner or the owner/client.
