Statistically Aussies aren’t great at getting their wills done let alone committing to doing their succession planning done properly. About 50% don’t have a will – unwittingly choosing instead to put grieving loved ones into turmoil after they die. And even when they do have a will – chances are the terms could be contested by the families left behind. In the last decade alone we have seen a 50% increase in contested estate matters in Australian courts.
Throw a family business or rural enterprise into the mix and that adds another layer of complexity that many families don’t know how to face! And the statistics aren’t pretty here either – 70% will fail or sell before the second generation takes over, and 90% will fail or sell before the third generation can take the wheel.
When you consider that a recent report shows 86% of contested estate claims are brought by immediate family members and over half of all claims are made by competent adult children – it seems that there is a very real risk that inheritance conflicts will arise when close family members feel unhappy about how an inheritance has been left.
Before you throw your hands up in despair – what if I told you that holding successful succession planning conversations pre-death guaranteed smoother transitioning of inheritance and less conflicts post death? Interested? Then, read on to learn how.
The reasons why most fail to plan pre-death
You probably already know the reasons why people (and perhaps you) avoid succession planning, such as:
- being too busy living and not finding the time to get it done
- not wanting to face the thought of what might happen if you died
- believing that wills are only needed when you are old or wealthy
- thinking that when you are dead it won’t matter (never mind the mess and heartache you leave behind)
But often the bigger reasons are because many:
- are worried that if they do leave instructions, they won’t be followed
- don’t not know where to start
- want to do the right and fair thing but are unsure of expectations of others
- don’t know how to leave things when circumstances are a bit complex – like having a blended family or children with different needs, or drug or alcohol dependent loved ones
The trouble in part, is that you know you should have a plan, but you also probably know that it is more than just doing a will. information must be gathered, plans made for the “what ifs”, conversations had and none of it easy or quick. You might even be worried that having these conversations might open a can or worms, or potentially set off a grenade of family disharmony. But you also know that these issues won’t magically disappear when you are dead and that your family may not remember you well if you leave them with the task of fighting things out when you are gone.
Successful succession conversations
Imagine if you could have a conversation with your family members about what you hoped and wished for their future while discussing how you were thinking about leaving your inheritance to them or what your hopes were for the succession of a family business. Imagine if you knew that this discussion would not only give you the peace of mind you hope for, but also give your family understanding and certainty about their own financial futures. Imagine if by doing this, you could improve your family communications and make sure that future fights over your hard earned inheritance and the family business would be avoided.
It sounds too good to be true right? But it is actually possible!
How? By having guided and well supported conversations about family legacy with your family members when you take steps to prepare your succession plan.
Instead of making plans and hoping for the best when you’re gone, think about taking a collaborative team approach to succession planning. This can be done by putting together a team of advisors – your estate planning lawyer or business succession specialist, your accountant, a financial planner and someone with the skills to help you and your family manage the important conversations in a constructive way (like a mediator or communications coach). Then invite your family to the table – to talk about what your family legacy means to them and to their future generations.
Doing that will help you:
- Learn what your family members hope for their own futures. It might not be what you assume. By asking you will know better how to leave things to your loved ones in a way that meets their needs, and in a way that is smooth, safe from future risks and tax effective.
- Communicate your own wishes for your future and your hopes for how the legacy you leave behind might take care of your loved ones. Change the conversation from being about money and assets, to being about the legacy of values you hope to leave behind – financial responsibility, financial freedom, family traditions, community, philanthropy to name a few.
- Explain how you are trying to make things “fair” for everyone, while balancing the various needs and expectations of your family members – then listen to the feedback from your family on how they perceive your plan.
Supported Succession Planning – working with a Collaborative Professional team
All of this can be achieved by doing your succession planning with a team of collaborative professionals. This is a relatively new approach – particularly in Australia. But if Australia follows the trend set in the USA, where this model is used increasingly as part of a more bespoke succession planning service called for by families wishing to do their succession planning in a more holistic way – then fights over inheritance and business succession post-death will be avoided entirely for those families. Why? Because family members won’t be kept in the dark about what might be in the will and they will not be left feeling unhappy about the succession plan.
Involving a team of collaborative professionals means that your family will be involved and supported in the succession planning process in an interest-based discussion – where everyone will work together to reach an agreed succession plan that will best meet all family members’ respective goals and needs and give certainty to all for their respective futures.
To take this approach you and your family will need to understand and commit to a process. Gathering in the relevant information to hold these conversations successfully will take time. That is why the Collaborative process takes place over a series of meetings, so that the many and varied issues that will impact on your succession plan can be worked through in a calm and measured way. Then once a succession strategy or plan is agreed – you and your family will need to keep working together with your advisors to implement the plan and to adjust it as needed (particularly if handing over the reigns of the family enterprise in retirement is part of the plan).
It will also be critical to the success of the process to have all family members stay focussed on shared family values. Differing personalities and the family dynamics they create can cause conflicts in communications as they progress – so having a clear understanding of and commitment to family values from the outset such as maintaining relationships, seeing the family business survive and thrive, acknowledging differences, taking care of all, disadvantaging none – will help guide the process successfully.
Is Collaborative Succession Planning for you?
As great as it sounds – the collaborative process will not suit all families (nor will it suit all lawyers and other professionals).
For the collaborative process to succeed – every family member must be committed to something greater than just a legal outcome or agreement. Those who truly engage with the collaborative process are those committed to maintaining their relationships within their family unit or at least be committed to finding a way that will allow everyone to have certainty for their futures and to live their own lives without ongoing conflict. The collaborative practice process works best when everyone can put themselves in another person’s shoes and be willing to keep their own attitudes and personality in check so that an agreement can be reached which takes into consideration the goals and interests of all involved.
The collaborative model will also only appeal to the lawyers and other professionals who are willing and able to act as facilitators for the family instead of trying to take control of the process and impose a solution that seems best to them. The professional team needs to allow the family to work through the emotional and financial drivers that might be causing family conflict (or might cause it in the future), and help them find solutions that will work for their unique family dynamic and circumstances.
The collaborative process is not an easy one. But it is one that holds the promise of strengthening family relationships and the satisfaction of knowing that a holistic and lasting agreement or succession plan can be reached. Families are then given the freedom to live their lives with certainty for their future knowing that conflict down the track will be avoided.
If you are a family business owner keen to start the conversation with your family about the succession plan for your business there are many helpful resources available to you Australian Small Business and Family Enterprise Ombudsman and Family Business Australia – they have a series of checklists and suggestions in their Introductory Guide to Business Succession.
If you want to avoid conflict for your family post-death and this collaborative succession planning process appeals to you, we can help you structure a team to meet your needs.
At Resolve Estate Law, while we don’t prepare succession planning documents, we work with a number of collaboratively trained estate planning lawyers who do. If you want to do your succession planning by involving a collaborative team of professionals to help you do that in a holisitic way – we are here to help. Contact us by phone or email, or click here to arrange your complimentary 15 minute call to discuss how we can assist.