The late great country singer, George Jones, had a hit with the title “Who’s Going to Fill Their Shoes?” It was a lament on the state of country music as it lost its connection to its roots and became more commercial. This entry has nothing to do with either country music or the complaints by old timers against the faults of young whippersnappers. Instead, it is going to focus on the confluence of two topics of concern to trusts and estates – the looming massive generational wealth transfer, and the continuation of a family business. This entry is more of a collection of recent articles and publically available resources than it is a comprehensive analysis, but perhaps one or more of the links will spur the reader to seek proper advice.
- The Great Wealth Transfer is Coming! It has been variously estimated that as the baby boomers pass from the scene, they will leave to their loved ones among Generation X and the Millennials huge amounts of wealth, estimated to range from $15 trillion, $30 trillion, $59 trillion, or even $68 trillion.
It remains to be seen if these large amounts of wealth will be sufficient to pay for more than three semesters of college for the grandchildren or great grandchildren of the baby boomers, but they’ll be gone so they won’t have to worry about it.
Nevertheless, it certainly is time to think about estate planning, given the proposed tax changes. Regardless of any changes to the tax laws, proper estate planning involves more than tax efficiency. It also involves avoiding problems that could lead to litigation and its consequent expenses. The three major sources of litigation are: a) inattention to family dynamics and the failure to plan accordingly so as to avoid the disgruntled distributee from making trouble; 2) the careless drafting of testamentary documents that result in litigation and some third party, i.e., the court, trying to “guess” the intent of the testator from the words he or she (or more likely his or her attorney) chose; and 3) the choice of the wrong fiduciary.
Finally, as an illustration of how this issue is gaining wide currency, how can one resist an article on the website Vox titled “The impact of inheritance, A ‘great wealth transfer’ may be on the horizon. Will a gift from grandma save the middle class?” If the title is not catchy enough, then how about its lead sentence, “Technically, Megan is a farming heiress.”
- Business Succession Planning.
It’s one of the most common issues related to the future of a family-owned business: How do the owners pass the business to their children? Moreover, how do they know if their children will even want to take over the business, let alone make it profitable for the long term? This is a complicated issue, involving issues of corporate governance, income taxation, gift and estate taxation, family dynamics, commercial transactions, etc. In an excellent article from Crain’s New York Business we read:
A shocking number of U.S. businesses lack a detailed, written succession plan. When you look at family businesses and companies with annual revenues below $50 million, the absence in planning becomes especially pronounced. In its 2019 US Family Business Survey, PwC Private Company Services found that only 18% of family businesses said they have an effective plan.
This is particularly troubling considering that succession plans govern far more than scheduled exits. They can also serve companies as a powerful tool for navigating unforeseen transitions. The social and economic fallout from the coronavirus pandemic only underscores the need for businesses to account for force majeure events in planning for their future.
There is a wealth of information on this topic available on the internet and should provide the reader with an introduction to the complexities of the issues presented and the need to seek out experienced and knowledgeable advice.
 For example, see this article on Investopedia, “How to Create a Business Succession Plan”: