The HBO series, ‘Succession’, offers a unique perspective on the matter of estate planning in family businesses. Despite the fictional Roy family’s ridiculous wealth and soap opera-like drama, their problems are largely wealth agnostic and based on real-life ultra-high-net-worth families like the Murdochs, making some of their issues rooted in an element of reality.
Whilst as a sensationalist, yet compelling drama series, it can by no means be considered a blueprint as to how the succession of a family business should be handled, the show has at least brought the subject to the fore and succeeded in starting the estate planning conversation within many family-run businesses that thus far have not tackled this complex issue.
Here we take a look at the real-world lessons we can learn from ‘Succession’ and discuss the realities of estate planning for UK family businesses wanting to safeguard their long-term viability.
The real meaning of ‘Family’
The Roy family is by no means ‘conventional’, and what we see on screen is a complex web of remarriage, backstabbing and infidelity. But it’s true to say that the modern era has seen the decline of what we know as the traditional nuclear family, with the very concept of ‘family’ becoming more fluid and personal to each individual. Divorce, remarriage, single parenthood, adoption, and longer lifespans have all contributed to the rise of non-linear, blended families. Additionally, the idea of “chosen families” has gained traction in the LBGTQ+ community.
Many long-term committed employees are often considered to be part of the family fold too, and those who have shown dedication and prowess in championing the business or are critical to its ongoing success should always be factored into any succession plan, regardless of whether they are blood relatives or not.
It’s important to remember with estate planning that forcing someone who is under-skilled, unwilling, or just not yet prepared to take the reigns of a business just because they are family can be catastrophic.
As a business owner, there are many effective ways to maintain family control without appointing a family member as CEO. While it might seem logical to promote the most experienced family member, hiring an outside CEO can be more beneficial for the success of the company, offering a new perspective and greater objectivity. Other options, such as establishing more philanthropic roles, can also allow family members to remain connected to the business while pursuing their passions.
The future is unknown
Many business founders are hesitant to address estate planning for their family business, because the business is effectively their ‘baby’ – something they have nurtured since conception – and the idea that it will still thrive without them is challenging.
However, building a successful business and taking care of family takes equal forethought and care in terms of time and consideration, and in ‘Succession’ this is something that is clearly missing, as is depicted at the outset when the viewers are show patriarch Logan Roy’s decline into ill health.
What this clearly outlines it that it’s important to have the tough conversations about estate planning sooner rather than later because time is limited. Unforeseen circumstances can often compromise an individual’s ability to actively run a business, or even air their thoughts. Waiting until it’s too late can leave them vulnerable to legal challenges based on competence and undue influence, at which point, the window of opportunity to voice an opinion will be compromised.
Planning doesn’t end at Will writing
In ‘Succession’, the antagonist’s wife, Marcia, assumes complete control over her husband’s care and wellbeing after his sudden illness due to her status as his spouse and power of attorney.
Whilst the concept of drafting a Will is considered the be-all and end-all of planning, this isn’t always the case. What this scenario highlighted was how useful additional lifetime documents like Living Wills and powers of attorney can be for ensuring an individual’s wishes are carried out should something impede their ability to convey their thoughts or make decisions themselves.
- Advance Decision (Otherwise known as a ‘Living Will’): This establishes medical and healthcare wishes in the event of loss of decision-making capacity, for example, terminal illness. With an advance directive, you can clearly outline which specific treatments you wish to refuse in the event that you are unable to express your preferences. It is vital to note that if you wish to refuse treatment in certain situations but not others, you must be explicit about all such circumstances to avoid any confusion or ambiguity. In Scotland and Northern Ireland, this document is called an ‘advance directive’ and holds no legal obligation.
- Lasting Power of Attorney (LPA): An LPA empowers an appointed person or persons to manage your finances and make medical and personal welfare decisions should you become unable to do so.
There are two types of LPA: A “Property and Financial Affairs” LPA puts your loved ones in charge of paying bills, making property transactions, and handling bank accounts and investments, while a “Health and Welfare” LPA covers health and care decisions and choosing a place of residence if you’re incapacitated. Unlike an Advance Decision, you do not need to outline your wishes in all possible future situations and circumstances, making the LPA a far more flexible option.
Appointing someone as your Attorney ensures your financial life is in capable hands, saves you from unnecessary anxiety, and guarantees prompt and proper handling of affairs should you be put in vulnerable circumstances.
Avoid Nasty Surprises
In times of stability, people tend to stay composed. However, when plans fall apart or are not executed, panic sets in and rationality goes out the window, as happened when Logan Roy second-guessed his succession plan on the show, and publicly embarrassed his son Kendall, leading to a whole host of additional drama for the family.
When emotions run high, making sound business decisions may become challenging, which is why it is so important to prepare a succession plan with a level head, communicate the plans with those concerned, and engage legal counsel to ensure that the plans are sound and cohesive in achieving their objectives.
Surprises or deviations from the plan typically exacerbate already tense situations, so it is always best to be open and upfront with those who will be directly affected by this shift in power. This is not to say that a plan can’t or even shouldn’t evolve to reflect changing operational or familial circumstances, in fact a certain amount of flexibility is encouraged, but if plans are not appropriately discussed or communicated before being implemented, there will likely be those who feel blind-sided, and this may cause conflict.
Be mindful, however, that family disputes over estate planning are frequently utterly irrational, and often borne of the extreme emotions that come with the process, rather than the plan itself. As such, it’s preferable to ensure that these matters are not rushed, and that there is opportunity for discussion over the possible ramifications of any plan initiated whilst all parties are still alive. The fallout is likely to be much worse if the individual who drew up the plan is no longer there to explain themselves.
The topics that need to be discussed, include;
- allocating responsibility for the company, its structure, and the roles of those involved;
- the potential need to establish trusts;
- who will receive an income or dividends and whether others will be brought into the management or ownership structure; how any assets outside of the company are to be distributed;
- and how any beneficiaries outside the company are to be provided for.
Should you require support with estate planning, please contact our specialist team for an impartial, confidential consultation.
