Business succession planning can take on many forms. Similarly, estate planning can take on may forms.
While in theory, estate plans are distinct from business succession plans, in practice, any business succession planning must be understood in conjunction with estate planning if one is to avoid litigation and best protect their personal and professional legacy.
Documents may be contradictory
Succession planning may require regular updates as the professionals working for a company change over time. Employers that mandate the creation of succession plans may also require annual reviews and updates to succession plans to protect the organization. Estate plans do not always receive the same attention after their initial creation.
Testators may assume that their documents protect their personal and professional legacy, as well as their loved ones, indefinitely. However, failing to make any revisions to either of these sets of documents despite significant changes in their personal circumstances or their careers can lead to complications. Comparing a succession plan to an estate plan can potentially highlight how outdated a will or other testamentary documents have become, or vice versa.
Particularly in scenarios where plans for ownership or leadership roles at the company directly contradict the terms included in estate planning documents, there may be reason to suspect that the estate plan is outdated and therefore ineffective to achieve your goals.
Even in cases where estate planning and business succession documents do not directly contradict one another, litigation can ensue as those assuming authority within the business may need the court to approve any major choices they make about the organization before the completion of probate proceedings.
Those expecting to inherit from an estate that may include business ownership interests, and those groomed to take over leadership positions at companies, may need to be ready to assert themselves when there is a conflict between a succession plan and an estate plan. Acting promptly by initiating probate litigation can potentially help to preserve not just the decedent’s legacy but also the business that they helped operate.
