Planning: It's Not About Where You Are, But Where You Are Going

Planning: It's Not About Where You Are, But Where You Are Going

One of the challenges I often encounter in my practice, particularly in cottage succession planning and family business situations, is that clients tend to focus on how things work in the present. They assume that present methods of management, problem-solving, payment of expenses, use of the family cottage and how ownership interest would be transferred will work the same way in the future. That is a risky assumption.

To expect that the next generation(s) of owners will maintain the same types of relationships, communication styles and cooperative efforts that the current generation enjoys is wishful thinking. That fact, together with factors that impact people’s lives such as the economy, health of family members, individuals coming into a family by marriage, etc., suggest that very few things will actually “stay the same.”

Think about it. How many things in your life have stayed the same in the last five years, or even the last five months? Certainly some things in our lives are more stable and predictable than others. My point is that adopting a cottage or business succession plan that is based on managing, solving problems and accommodating everyone’s goals by addressing matters “like we always have in the past” is not a plan at all. When this expectation turns out to be wrong, it is oftentimes too late to plan, resulting in the sale of the family cottage or business due to lack of consensus or structure that could have been implemented through planning.

Consider this common scenario, which involves clients being challenged in anticipating change and identifying the need for planning: Three siblings inherit the family cottage from their parents (or have established practical ownership and control from parents) who, because of age and health, are no longer involved in the management or control of the family asset. The three siblings have a reasonably good relationship and have effectively managed the family’s asset through cooperation, compromise and the exercise of good common sense. This style has worked; everyone is comfortable with it so nobody wants to change. For these situations, my advice is that planning for inevitable changes in the future doesn’t have to mean a total disruption of how things are currently decided. Just because a plan may provide for ways to manage an asset, pay expenses or use the asset in the future doesn’t mean that those who have accomplished those things now must change.

Creating a plan for the future doesn’t mean sacrificing all current practices. In fact, planning most often takes current situations and methods and creates ways that those positive practices can be preserved and used in the future.

Change is inevitable. Although succession planning for family legacy assets like family cottages or businesses is not guaranteed to protect those assets, good planning most often yields better results than good expectations.