SUCCESSION PLANNING FROM BEYOND THE GRAVE

SUCCESSION PLANNING FROM BEYOND THE GRAVE

By: STUART KANTOR

IN TODAY’S instant gratification society, it is hard to justify forward thinking, let alone planning from beyond the grave. However, excuses aside, succession planning is important, for were it not for “old money”, there would be little progress as more poor souls would enter the poverty cycle.

Succession planning enables compound growth to work its magic over generations as it funds education, business, and retirement. Additionally, succession planning is not only about money, but about control and your last chance to make some sound decisions.

So with the aforementioned in mind, here are a handful of areas where succession planning occurs.

Last will and testament

Your will is the foundation of your estate plan. It sets out your personal wishes, and ensures that these wishes are carried out. Of course, your will is an important tool to reduce tax and other easily-avoidable costs at death, and if you have minor children or dependants with special needs, your will is incredibly important so that their needs are protected.

Inter vivos or testamentary trusts

A trust is a separate legal entity which can (not will) continue in perpetuity. Trusts must be used for the right reasons, and whatever the pundits may say, trusts require very careful planning in order to be tax efficient. Such planning can be onerous, and comes at a cost.

That being said, if you plan on building a substantial portfolio, a trust can be a great estate duty saver and a preserver of wealth. Finally, be sure to choose the right team of trustees.

Business continuity agreements

A “Buy and Sell” Agreement If you are a partner or shareholder in a private business, when you pass away your estate / wife / child will inherit your share of the business. Problems may arise if your wife or child does not want to be involved in the business, or if the remaining shareholders don’t want your wife or child to be involved in the business. In this regard, life policies would supply the liquidity to pay the wife / child out.

The agreement is also intended to avoid the hassle of having to search for a willing buyer. However, please note that if you have “buy and sell” life policies in place, but no contractual agreement, then you do not have a buy and sell agreement in place.

A “Key Person” policy

If you have a key person in your business without whom the company may suffer serious losses, then business must considering owning a life and disability policy on the key person’s life so that funds to replace and cover losses can be paid out in the event of their death or disability.

Your life

Finally, succession planning need not only be about death, but also about your life. How financially prepared are you for life after work, for instance? Also, before you walk down the aisle into marital bliss, please make sure that your ANC does not become a four-letter word.