The Estate Planning — Psychology Interface
The following excerpts are from Psychology of Succession Planning, Forbes.com, Oct. 21, 2008:
The family must * * * consider the psychology of succession planning, which includes a number of emotional issues that can impact a family’s judgment or even cause the business owner to postpone succession planning. For example, mortality is difficult to discuss with family and friends, which can make succession planning a challenge. If someone is hasty or unwilling to plan ahead, there will be a financial impact.
Also, some business owners are reluctant to change and hesitant to plan for new management. Many often wait until they are approaching retirement before thinking about business transition. Unfortunately, at that point, it may be very difficult to bring children into the business.
Additionally, the business owner may fear losing power and control over the company, especially because identity and self worth are often tied to the business. The founder may put off constructing a succession plan because the thought of losing control of the company can be hard to accept.
Family dynamics can also be difficult for owners to manage. A tax-efficient estate plan can fail if family dynamics are not properly addressed at the start of estate planning. Intra-family fighting over financial and managerial interests in the business can harm a viable business.
That is why it is often beneficial for a third party to facilitate family business meetings to promote fairness and impartiality.
Special thanks to Neil Hendershot, editor of the PA Elder, Estate & Fiduciary Law Blog, for bringing this article to my attention.