By Darin Drennan, Wealth Planner for Arvest Wealth Management – Advanced Planning Team
Small business owners are often celebrated for their resilience in the face of competition and disruptions, such as economic downturns, market shifts and supply chain issues. However, while they focus their time and energy on addressing today’s challenges, they may be neglecting the future of their business if they don’t commit to a comprehensive succession and estate planning process.
Succession planning involves intentionally transferring leadership and ownership from one entity or generation to the next, while estate planning focuses on distributing assets and minimizing tax liabilities after the owner’s passing.
Even if they acknowledge its importance, many business owners delay succession planning because they think it will be complex or they simply don’t want to consider what will happen to their business when they’re ready to retire.
This same “I’ll deal with it later” thinking is also common regarding their personal wealth, and they may assume there will be ample time to organize their affairs later. Many believe having a will is sufficient protection, but a will is merely a set of basic instructions. Without additional estate planning tools, it must still navigate the probate process, which can be expensive and disruptive personally and to business operations.
While each business situation is different, the succession and estate planning process doesn’t have to be difficult. It just takes tailored professional guidance. Here are some fundamental steps to help you start the process:
- Conduct a comprehensive business valuation and inventory of assets, including business interests, intellectual property, real estate holdings, investment accounts and insurance policies.
- Assemble an advisory team, including your financial advisor, accountant and attorney who specializes in business succession.
- Investigate potential succession vehicles such as an Employee Stock Ownership Plan (ESOP), management buyout structure or family limited partnership. Each method offers unique advantages depending on your goals and the structure of your business.
- Consider establishing a revocable living trust that maintains your control during your lifetime while allowing seamless management transition upon your incapacitation or death. This approach avoids probate delays and expenses while providing flexibility in how assets are transferred to beneficiaries.
- Develop a business continuity plan to address immediate operational concerns should you become unable to manage the business. This plan should include documented procedures, authorized signatories and emergency decision-making protocols.
- Create a secure digital or physical repository containing all essential succession documents, business insurance policies, operating agreements and account access information.
- Review your succession and estate plan every few years or whenever significant business changes occur, such as major growth, acquisition of substantial assets or changes in key personnel.
- Remember that financial institutions like Arvest Bank offer specialized business succession services and experience in maintaining business continuity during transitions. These professionals can help implement your succession plan, help settle your estate efficiently or continue managing business assets to provide income to your beneficiaries.
Creating a team of specialists is a good first step in developing a succession plan. This team should consist of an accountant, attorney, trust officer, insurance agent and banker, all of whom can work together to enact a plan that can be executed successfully.
With more than $27 billion in assets, Arvest is a full-service bank that delivers financial solutions to individuals and businesses of all sizes. Since entering the Kansas City market in 2009, Arvest has grown to become a top 20 bank and the sixth-largest mortgage lender in the metro. The bank has 20 locations in the metro area.
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Arvest and its associates do not provide tax or legal advice.
Investments and Insurance Products: Not a Deposit, Not Guaranteed by the Bank or its Affiliates, Not FDIC Insured, Not Insured by Any Federal Government Agency, May Go Down in Value.
