Strong succession plans are vital to the sustainability of the business and should include family meetings to discuss plans to join the business and the vision for the business . For even the most successful closely held business owners, succession planning can be even more difficult than other critical business decisions they have faced. One of biggest misconceptions is that estate planning and succession planning are one in the same.

Succession Planning directly relates to the actual business itself. It is the strategy that will enable it to continue to operate smoothly and effectively as it is passed on to future generations. Estate Planning relates to all the assets in an individual’s estate including any ownership interests in closely held businesses.

Let’s explore deeper some key differences between estate planning and succession planning and important questions to consider when developing your succession and estate plans:

Succession Planning:

• Is the business viable into the next generation? If so, do family members not currently in the business intend to join the business and what is their vision? How do their individual visions align with the current vision of the business and other family members interested in the business as well?
• Should the business be sold to provide liquidity for future financial security?
• Who will take over running the business if not sold and are they properly qualified and appropriately trained to do so? If not, can they be and how so?

Estate Planning:

• What are the individual’s sources of wealth (all types of assets) and their potential estate tax exposure ?
• How does the individual define financial security and how much of their current wealth is below or in excess of that amount?
• Are any insurance and investment portfolios owned? And can they be used as liquidity to pay estate tax liabilities?
• What is the plan for final health care directives, funeral costs, and a distribution of the assets?

The Story of Thanksgiving Dinner

After having identified some key differences between succession planning and estate planning, you can start to see where conversations about ownership, wealth, and responsibility of the family and key business personnel could be awkward and can lead to disagreements within the family and/or owners.

Can you imagine sitting at the Thanksgiving dinner table and having a conversation with your two children about which one you prefer running your company through the next generation? Or, delivering the news that you’ve decided to sell the business after 25 years and are giving one of your children 60% of the sale proceeds upon your death because they worked for the business and the other child did not. This isn’t our idea of an ideal Thanksgiving Dinner either, but if you neglect to recognize the importance of considering business succession plans and estate plans, it could become or maybe even already is your reality.

Consequences of Not Planning Ahead

Without consideration of a complete plan which includes both a succession plan for the business, as well as the estate plan, serious financial and emotional consequences can affect your family business.

Lack of a Succession Plan often results in:

• No clear direction for the business without a known leader.
• Loss of employee faith in company leadership for business to continue and employees seek other opportunities for fear of uncertainty of business continuity and their personal job security.
• Lack of leadership at the top can create power struggles among middle management.
• Family units are broken apart over disagreements. An example is a disagreement between family members with voting shares attempting to direct the business.
• There is a potential loss in value due to a key person discount when surviving shareholders go to sell the business.

Lack of an Estate Planning often results in:

• Unforeseen estate tax liability.
• Probate court costs.
• Delay in distribution of assets and resolution of the estate.
• Potential litigation costs associated with disagreements among living family members.


To navigate these complex issues, it is important to consult with the right mix of professionals with expertise in succession planning, estate planning and business valuation and that are equally equipped to assist you in navigating difficult family relationships. This is where our professionals at TDT CPAs and Advisors can help serve you. Contact us to discuss your needs.

Are you ready to start the succession planning process, but not sure where to start? Download our 5-Step Guide to Creating Your Succession Plan.