If you were unable to run your business, what would happen to it? Would your family members, co-owners, managers and/or employees know what to do, and would they have the guidelines and tools they would need to help the business survive and thrive?

Succession Planning is a continuous process to plan for the transfer of knowledge, skills, labour, management, control and ownership of your business. Since succession is a process and not an event, it takes time and effort to work through and develop a comprehensive plan.

There are two main parts to developing a succession plan:

Exit Strategies
All too often, we focus on starting and building our businesses and we give little thought to what we want from our businesses. On average, business owners have 75% of their net worth invested in their business yet less than 15% of business owners have a strategy for getting their investment out of their business. Do you dream of retiring from your business? Do you plan to transfer your business to a family member or business partner? Would you like to sell the business to a third party? Each of these options has different repercussions for you and your business. Developing an exit strategy now will help you achieve your dreams later.

Intergenerational Transfers
Don't fall into the trap that jeopardizes too many family-owned businesses—the failure to properly prepare for a transition in ownership or a lack of adequate funding to complete your financial goals.
An intergenerational succession plan deals with three main areas:

In most intergenerational transfers, the transfer of labour occurs first and is relatively straightforward. The transfer of management and decision-making can be more difficult as it involves letting go of the control of the business and they are key to the success of the entire succession process. The transfer of management and decision-making should be supported by a training and development plan. It will help to ensure that the next generation has the necessary knowledge and skills to take over and successfully operate the farm business in the future.

The transfer of ownership of assets involves the actual sale or gifting of the business assets from one generation to the next. The transfer of ownership must be carefully planned and documented to ensure that no unforeseen tax circumstances arise, that business relations are maintained and to prevent any familial misunderstandings. Simpson Law Offices can assist you in all elements of planning and effecting the intergenerational transfer of your business.

Wills, Living Wills, Powers of Attorney
As you get older, it is natural and appropriate to think about what will happen in the event of a serious illness and what will happen after your death to the property you and your family have accumulated over the years. There are three primary legal documents which are relevant to a full understanding of your legal rights: a Will, a Living Will or Personal Directive and a Power of Attorney.

A will is a legal document in which you tell the people who survive you how you want your property disposed of. If you die without a will, your property will be divided up according to a procedure specified by law. A Will allows you to state how your property should be divided, provide for your favorite charity, state who will receive your heirlooms, set up trust funds and nominate a guardian for your minor children.

The use of a Will can speed up the process of distributing your property after your death and can save expenses. Distribution of your assets to your family as soon as possible after your death will help them to avoid financial difficulties and emotional stress. The investment of a little time and a few dollars today can save your family significant time and money later.

A living will, also referred to as a personal directive, contains your written instructions about the level of medical treatment you want in the event that you are unable to express your wishes verbally. For instance, you may want all possible measures taken to keep you alive – or you could instruct that nothing be done to keep you alive. A living will or personal directive enables you to make your own decisions, and ensure that others are aware of these decisions.

A living will or personal directive may be made by anyone who is at least 18 years of age and who is presumed to understand the nature and effect of the personal directive. The personal directive must be in writing, dated and signed by a witness. There are restrictions on who can be a witness.

A Power of Attorney is a written document by which you appoint an agent to act in your place. This agent is known as an “ attorney in fact”. Any competent adult can be an “ attorney in fact”; such a person does not have to be a lawyer. An "Enduring Power of Attorney" is a Power of Attorney that contains a clause stating that the powers remain in effect after a donor suffers a loss of capacity.

There are two types of Enduring Powers of Attorney. The first takes effect immediately and specifically states that it is to continue even if the donor becomes mentally disabled. The second, often called a “Springing Power of Attorney”, takes effect when the donor becomes mentally disabled or some other specified event occurs.

An Enduring Power of Attorney must be in writing and dated, signed by the donor in the presence of a witness and signed by the witness in the presence of the donor. To be effective the Enduring Power of Attorney must either state that it is to continue notwithstanding any mental incapacity or infirmity of the donor that occurs after the execution of the Power of Attorney, or that it is to take effect on the mental incapacity or infirmity of the donor.

 

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