Family Business
Issue No. 30 - August/September 2006
Trusty way to smooth transfer of wealth
by Penelope Herbert
Succession planning that keeps the peace among the children and other key successors of a family business founder demands careful legal consideration.
The issues are plain: how to compensate family members who are not involved in the family business; how to ensure compensation doesn't cripple the business or constrain the principal's retirement; and how to transfer asset control without taxation destroying its value.
Getting it right has never been more important, according to new Mellor Olsson partner, Phil McGovern. Phil assists clients in the crossover issues between succession planning and will drafting.
He says estate planning gives business principals a chance to make sure of smooth succession even if they aren't around to supervise it. But he says too many arrangements leave loose ends that can see years of hard work wasted in legal wrangling.
“At the moment we're seeing the greatest transfer of wealth that's ever occurred in our society,” Phil says.
“People have more assets than ever before. They need to know how to pass those assets down to the next generation and how to best protect those assets.
“It's a fact that everyone will die one day. Those involved in professional and commercial activities usually have assets that need to be dealt with appropriately.
“Asset protection is important and succession planning is essential for the effective passing down of assets.”
Phil's work in estate planning often includes recommending and setting up the most effective type of will for a client - wills that can offer potentially significant asset protection and tax advantages for the benefit of beneficiaries.
One hurdle he often has to overcome is making clients aware of the need to coordinate their wills and their corporate structure. For example, he often discovers that the legal detail of a business principal's existing will refers to or presumes the business as a will ...
