For family-owned businesses, issues of succession form the center of all estate planning efforts. The manner in which a business is handed down differs for every family, and there is no such thing as a one-size fits-all legacy solution. When addressing the issue, Michigan families should take the time to sit down with their loved ones and discuss the matter at length.

The first thing to consider is whether any of the children are willing and able to take on ownership of the business once the parent or parents are deceased. In cases in which one or more children do not have an interest in being involved in the business, the estate plan becomes far more complicated. Because parents usually want to leave their children equal inheritances, a degree of number-crunching is in order.

The child or children who do not want to inherit the business are usually compensated with a higher share of other assets. This division of assets is different for every family, but in order to ensure parity, a value must be placed on the business itself. There are professionals who specialize in assessing the value of a business, and this approach will result in a written estimation of value. From that point forward, the family can consider what other assets can be left to equal the value of the business interest that is being forfeited.

Another approach is to give all children an equal share of the business, with the option that those who wish to retain the business can buy out the shares of a child or children who do not wish to remain involved. This is a good option for Michigan families in which adult children have already achieved a high degree of success within the business, and have the financial ability to buy out the declining party or parties. In this way, the family’s business legacy can be preserved, while all children are treated equally.

Source: bizjournals.com, “Estate, succession planning for business owners“, Judy Cuzzacrea Wagner, June 4, 2015