In the recent case of Clark v. Clark, two brothers initiated legal action against another brother concerning the other brother’s ability to function as trustee of a trust as the result of a brain injury. The men’s mother established a testamentary trust previously that held family business and appointed the third brother as trustee. The will stated that if anything happened to the third brother, the other two brothers would be designated as co-trustees. The two brothers claimed that due to the brain injury, the third brother could no longer function in this role. As a result, the two brothers thought to be named successor co-trustees under the will.
While the court also considered a nuanced injunction issue, the court ultimately relied on a plain text reading to determine that due to the third brother’s brain injury, the brother had stopped or was not capable of functioning as a trustee and that the other two brothers were appointed successor co-trustees.
What Makes Succession Planning Critical
Owning a small business comes with plenty of advantages, in addition to challenges. Besides the daily demands generated by the business, you also often must be adept at managing stressful situations and interpersonal conflict.
One of the most critical choices that a person must make and one that can have the most profound influence on the length of a business is the issue of how the business will be passed onto future generations. Various events might cause you to need to pass on the business including retirement, death, and disability. One of the best ways to avoid disagreements with business succession is to clearly and thoroughly state the terms now of how the business will be passed on to future generations before any disputes arise.
Make Sure to Plan Ahead for Succession Planning
Even though you might not immediately intend to retire, the longer you wait in creating a success plan, the more likely your business will encounter challenges when the transfer eventually happens. As a result, even if you do not plan to retire any time soon, it’s still a great idea to have a succession plan. Furthermore, situations are known to rapid development and some people decide to announce unanticipated retirements. Due to unforeseen life circumstances, you might find yourself declaring sometime soon that retirement is the best option for you. If this happens, you might not have a business succession plan in place. Not to mention, the risk exists that at any moment you might be suddenly incapacitated or diagnosed with a serious illness that makes it impossible to operate the business as you once did. If this situation happens and you do not have a succession plan in place, you can suddenly find yourself facing a serious lot of trouble.