Most Business Owners want to protect and preserve their Legacy that they have worked hard to build. Those running a family Business might want to ensure that the Company, along with its Assets, passes on to the next generation or intended successors, and continues to thrive beyond their lifetime.
But what if your heirs or intended successors are not ready to run the Business when the time comes? They may lack the experience, interest, or necessary skills to do so. They could also be pursuing different careers or are simply unprepared for leadership roles of this nature.
A Trust can provide a flexible framework for managing and protecting the Business and its Business Assets, even when the next generation and/or intended successors are not quite ready to take the reins.
USING A TRUST IN BUSINESS SUCCESSION PLANNING
By placing Business Assets into a Trust, Business Owners can specify and control how and when the next generation or their intended successors will receive control. This approach can allow for a gradual transition, giving heirs or intended successors the time to develop the necessary skills and experience needed to run the Business properly. Trusts can also provide for some potential tax benefits and serve to protect the Business assets from potential legal disputes down the road.
THE PROTECTIONS A TRUST CAN PROVIDE
To adapt to changing circumstances, Business Owners can include certain provisions in a Trust that can protect a Business during generational and/or successor transitions.
These can include:
• Using a Professional Trustee: This can help to ensure unbiased decision-making and specialized knowledge in managing the Trust, the Company, and your Business Assets, before your heirs or intended successors can take over running the Company.
These experts can either be individuals or institutions like banks or Trust companies who provide Trustee Services.
• A Phased Transfer of Control: A gradual transition or hand-over of responsibilities can help the next generation or intended successors learn and grow into their roles, thereby reducing the risk of sudden management changes that could affect the day-to-day operations of the Company. This can involve a step-by-step plan over several months or even over several years, as desired, to ensure that the transition is smooth and successful.
• Contingency Plans: Including back-up strategies in the Trust itself, as well as inserting corresponding language in the Company Bylaws or Operating Agreement, such as: a) The option to sell Company Stock and/or Ownership Interests; or b) the option to bring in outside management, can ensure Business Continuity regardless of future circumstances that may arise.
• Advisory Boards or Committees: Once established, these groups can provide additional guidance and oversight to the Company, bringing in diverse areas of expertise, in order to maintain the Business’s direction and ensure success during transitions to heirs and/or intended successors. These boards or committees may include family members, industry experts and trusted advisors.
Take note that your choice between a) Revocable Trusts, which you can change or amend during your lifetime and b) Irrevocable Trusts, which you generally cannot alter or easily amend after they are put into place, will ultimately affect the level of control and protection your Company receives. Revocable Trusts generally offer more flexibility with less Asset Protection from potential creditors and/or lawsuits, while Irrevocable Trusts can offer stronger Asset Protection but less flexibility in terms of future amendments/changes.
Don’t put it off any longer. Call Evergreen Law Group, LLC, today to schedule your consultation with an experienced Business Succession Planning Attorney.
