There is a lesson to be learned from Tywin Lannister, the influential patriarch of Game of Thrones. Despite amassing great wealth and power throughout this life, his attempts to create a business legacy for his family failed.
A family-owned business is a hard-won commodity and is considered a legacy to be passed from one generation to the next. However, that legacy is often lost in the transition because of poor estate planning. More than 70 percent of family-owned businesses do not successfully survive the transfer from one generation to another.
How can a business owner ensure their plans for the future are successful? As a first step, he or she should communicate with family members about their intentions for the business. Then, a business succession plan that transfers control and ownership to primary family members (including in-laws or other relatives, if they are involved with aspects of the business) should be established.
The business succession plan may also include details that preserve “institutional memory” to keep legacy reputation intact. Plans should specify who actually owns the business, what advisers are on board to help with the ownership transition, who is in charge of the day-to-day business activities, and what provisions have been put into place for the heirs not actively involved in the business.
The business owner should work with an estate planning attorney to establish this business succession plan. . The estate planning attorney can also assist with plans to ensure that the business has access to a significant cash flow to pay estate taxes, to provide compensation, supervision and training for employed family members, and to establish a buy-sell agreement in place for future sale of company shares or partnerships.
Ensuring that the family business does not fall victim to the same fate as the Lannisters requires a unique combination of proper estate and tax planning, business acumen and common-sense communication with those closest to you. Hiring an experienced estate planning attorney to help put these plans in place is a necessary step in protecting one’s legacy.
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