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Don’t drop the baton: How to have successful succession planning conversations with the next generation

People generally have a propensity to avoid discussions about money.  When you pair this with potential exposure to uncomfortable existential realities about death or—equally frightening for some—retirement, many parties opt to go mute.  They take a deep dive into the defenses of avoidance and denial.

For families who have amassed assets and wealth,  which may or may not be a part of a family business, determining how, when, and to whom to pass the baton and the bank account can be complex.  The uncomfortable reality that it would behoove parents to radically accept is that the time will come when they cannot be the one making the next lap around the track.  Something will happen with the baton.  It might be dropped, potentially resulting in forfeiture of the race.  It might be a stressful hand off in which you can count yourself fortunate if tripping and twisting of ankles are the worst of the injuries sustained by one or both parties.  Or, it might end up in the hands of someone you don’t want finishing the race you worked so hard to train for and start. If you don’t make a plan, Uncle Sam will gladly make one for you (and those in line to follow in your footsteps).   He typically charges a hefty fee to actively manage these matters last minute.  

The choice is ultimately yours. 

It is wise to consider that if you truly want a smooth transition, strategizing for the hand-off should be a part of the training well before the day of the race.   On the family financial track, this looks like repeated conversations in which initial emotions or discomfort can be ironed out.  When participants in wealth and business succession plans have a stronger sense of confidence, and ability to engage in discourse that is less emotionally charged, real communication can take place.  This focused communication will result in prudent business and financial practice.

For some, the prospect of passing on a hard-earned legacy to children activates a sense of fulfillment.  “This is what I’ve been working for. . “  “I wanted my children to have something better than I did. . .”  For others, envisioning the next generation in the decision-making seat can elicit other emotions.  Deciding how to part and parcel assets between siblings can be complex.  Fair may not be equal.  The process can become overwhelming, and there may be temptation to quit in the middle of the race.

If an underlying factor driving avoidance of discussions of wealth succession is related to parents’ fear their children will begin to coast, stagnate in professional trajectory, or become stunted in their own drive and ambition, fear not.  One of the best things that parents can do to set the stage for fiscal responsibility in the next generation is to scaffold with developmentally-appropriate financial literacy lessons.  Ideally, these lessons begin when children are young.  Modeling money talk is a critical component for ultimate success in this subject.  Parents, remember:  you are not gone yet.  You can exercise choice about how, when, under what stipulations, and to whom which assets will be ultimately passed.  Talking about a plan is not a slippery slope to your child being spoiled, gagging on a silver spoon with a platter of cash in his or her lap.

You increase the likelihood that your children will be responsible stewards of what you choose to pass on if it does not come as a surprise that they suddenly frame as a fortunate windfall of bonus money.  Lottery winners often end up bankrupt because they treat their winnings far differently than they have behaved with their bank accounts the day before they hit it big.  If you don’t want your kids to blow what you’ve spent decades earning, then take steps to help them adopt a mindset that you are facilitating the transition of an income stream, not birthday money. 

Parents can, at the end of the day, exercise the right to play the “if I’m not here, it’s not my problem” card.   While it is correct to assume that something will get figured out, that “something” could come at an exorbitant cost – financially and relationally.  Division and succession of family assets has potential to forever fracture relationships.  Unless you truly want to punish your children, don’t wait to make the plan and don’t wait to talk about it.  If you do, you may face the cruel fate of having to watch the natural, painful consequences of your choices play out in front of your eyes in the final days of your life without the cognitive and/or physical capacity to do anything to intervene with impact. 

Don’t wait for the day when having an uncomfortable conversation with your kids is the lesser of the two evils when contrasted with your current reality.   Most dads of pregnant 13 year-old daughters would probably agree with me on this one. Succession planning requires succession talking.  You don’t have to have the “what’s next” conversations regarding business, wealth, or assets alone.  There are professionals who are highly-trained to facilitate the planning, strategy, and discussion of these matters.  There can be a great deal of confidence, comfort, and wisdom in having a third-party participate and help facilitate challenging discussions.  They may serve to diffuse emotion or potential conflict.  They can step in to explain and describe when you are lacking words and at a loss.

As you consider how to have The Talk(s), I encourage parents to frame these challenging conversations with the following strategies

  • Acknowledge that it can be difficult to discuss the matters at hand.
  • Explain that you care enough about your children to have imperfect, difficult conversations
  • Ask:
    • What questions do you have?
    • Are there hopes or expectations you have about a transition or transfer?
    • What would be disappointing to you?
    • What would you like from me/us?
    • What concerns do you have?
  • Describe:
    • Your timeline
    • Your expectations
    • Your concerns
    • Your feelings
  • Circle back and check in about reactions to your proposition.
  • Clarify that transition planning is not a one-time conversation and will be revisited at a later time and date

Regardless of where you are on the track, today is a good day to begin to strategize and prepare for a clean baton exchange.  It will require words.  It will require action.  You’ve trained too long and too hard to sabotage your race now.    Don’t trip your kids while they are trying to start their first lap.


February 19, 2020

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