During estate planning, most people focus on their personal assets and family members. If they own or help run a business, they may want to consider establishing a succession plan in addition to their testamentary instruments.
Unlike an estate plan, which designates beneficiaries to assume ownership of an individual’s business holdings, a succession plan addresses the need to replace a leader when they exit the organization. Establishing a succession plan when establishing or expanding an estate plan can provide business owners and executives with peace of mind.
What does a succession plan include?
A succession plan is a document identifying the jobs associated with a position, as well as the training or experience required to fill that role. Succession plans often include a short list of people already working for the company who might be able to fill the position.
Succession planning allows an organization to begin training replacement candidates before a position becomes vacant. This facilitates a smoother transition and reduces the likelihood of major operational disruptions if a leader suffers a major injury or dies unexpectedly.
Succession planning helps protect the organization and can also incentivize high-performing professionals to stay at the company. The knowledge that they could move into a better position eventually and the training they receive to fill that role can motivate them to maintain their current positions instead of moving on in search of advancement opportunities.
Crafting or updating a succession plan can be as important as addressing ownership interests in a business during the estate planning process. Identifying personal estate planning priorities, such as concerns about a small business, can help people craft the right documents. Succession plans are critical for those who have invested in the creation or improvement of a business organization.