In our last blog, we discussed the idea of Continuity Planning; how it can differ from the traditional definition of Succession Planning, and how the Family Enterprise Advisor (FEA) program and designation can help advisors guide their client families through some of the non-technical (or soft) issues.

The problem with not dealing with the soft issues

Tax and legal solutions to Succession Planning like insurance, estate freezes, etc. unfortunately only deal with the technical pieces and completely ignore the family and their non-technical concerns. Remember when it comes to the family piece – failing to plan is planning to fail.

So, let’s get into it – what is the main tool that takes a technical Succession Plan and evolves it into a well-rounded Continuity Plan.

The Discussion

What we often see is a family that has worked hard, either through a career or a business they have built, created wealth that is more than they will need in their lifetime, and have two core issues:

  • How do I effectively pass this on to my children and/or grandchildren without ruining them; and
  • Who is going to take care of all of this when I’m gone, and how?

On top of these two issues are things specific to each family: maybe a child has some health challenges that will impede their ability to make decisions; a soon-to-be ex-spouse; estranged family members, etc. Specifics also change over time, so the plan you make today may not work when needed.

How to get to a solution

If the lack of communication often leads to a doomed Continuity Plan, then by logic, the converse – lots of communication – should lead to a successful Continuity Plan.

If you’re worried about them knowing the amount of their inheritance (or not) or who will be running the family business, not having a conversation will not stop them from being unproductive or unengaged. If they have these tendencies today or are prone to them, what makes you think their behaviour will be any different when they receive their inheritance?

Which scenario has the higher likelihood of success when an heir loses their family member:

  • A child has an inheritance windfall, much larger (or much smaller) than they were guessing and magically becomes capable of managing it or dealing with it on top of dealing with the emotions of family loss; or
  • As above, but with discussions held in advance, preparations made for and introductions to good advisors etc. without magnifying the emotional challenges by suddenly having money or a business handed to them they weren’t ready for?

One doesn’t have to share a dollar amount with an heir, but if there’s a range, or an expectation set in advance (not just an expectation of dollars, but also the why’s and how’s, etc.), the likelihood of success goes way up. By increasing the likelihood of success, you also increase the probability that your legacy will last longer, and be a positive one…not a burden on those left behind.

Next up – give some of it away

Speaking of Continuity planning, a financial legacy is often overlooked. As a parting thought, we wanted to touch on philanthropy, and specifically, and to give an early plug for Leave A Legacy Month, which is in May.

This movement was started by The Canadian Association of Gift Planners (CAGP) and their members to remind people that when you’re creating your Continuity Plan, to remember the charities you’ve supported through your lifetime, and to remember them for when you’re gone.   Have a conversation with your family and advisors about what’s important to you, and if there are specific bequests you want made on your demise, either through your estate, or “in honor of” contributions after the fact.

We’ll get deeper into the philanthropic conversation in a future blog.

A Blog Note

Going forward, we are going to blog quarterly and post on LinkedIn more frequently as we see things of interest. Our testing shows that this gets us greater interest and readership.  To stay up to date on CV TrustCo, follow us on LinkedIn