All in the Family.

• Author: WEINTRAUB, WILLIAM M.
• Position: Financial planning

Can your clients be too focused on the bottom line?

THEY CAN IF ATTENTION TO BUSINESS operations causes them to neglect planning for the orderly transfer of family wealth.

Succession planning often plays second fiddle in family-owned businesses: It doesn't add anything to the bottom line. It forces a discussion of senior family members' mortality and role in the business' day-to-day operations. It can raise issues of control, cash flow, family preferences and many other sensitive or uncomfortable issues. It also can carry perceptions of being unnecessary, time consuming, complicated or expensive.

For clients who want to address succession planning, you can play a pivotal role as their CPA and trusted adviser. Your long-term relationships with your clients, particularly family-owned business clients, and your intimate knowledge of the business' financial well-being make you the perfect "partner." Your knowledge of historical facts and transactions, as well as records, may put you in a position to make recommendations that could result in savings of hundreds, thousands or millions of dollars.

PRIMARY CONCERNS

A comprehensive succession plan includes both tax and non-tax considerations. Tax planning includes techniques designed to reduce income taxes, as well as estate, gift and generation-skipping transfer taxes. Non-tax considerations in a succession plan include compensation, cash flow and control.

An overarching question to address at the outset is: What is the long-term plan for the family business? To truly delve into the issue, you'll want to ask additional probing questions such as:

* Is it likely that the business will be sold? If so, succession planning should take a back seat to income tax and estate tax planning.

* Does the company have sufficient capital to operate for the long term, or will it be necessary to align with a financial partner to achieve the company's goals?

* What family members are included as part of the succession in management?

* Have senior family members discussed how to handle those family members who are not actively involved in the business?

* Are non-family members involved in the business?

* What incentives are needed to induce non-family members to remain with the company long term?

While it is impossible to predict the future, work with your clients to try and obtain answers so they have a clear understanding of how different issues relate to the long-term transition of a family business' management and ownership.

EVALUATING THE INTANGIBLE

Certain intangible factors should be evaluated as well:

* How do the business owners feel about their role in the company as management responsibilities, ownership and compensation levels change?

* Are senior members afraid to lose control?

* How will the changes affect the...