Who knew the Green Bay Packers could be a source of inspiration for your family business’s succession planning?

After winning 5 Super Bowls between 1961 and 1967, the Packers came up short of the big dance 25 years straight. So, in 1992, the Packers traded for the southern Mississippi gun-slinging Brett Favre, who went on to win 3 MVPs and lead the Packers to 1 Super Bowl victory. While Favre showed no signs of decline yet, the Green Bay Packers surprisingly drafted QB Aaron Rodgers in the 1^st round of the 2005 NFL Draft. Aaron Rodgers did not start a game for the next three seasons, but the succession plan had begun.

Taking over in 2007, Aaron Rodgers won 4 MVPs and led the Packers to 1 Super Bowl win. Rodgers was still playing at an elite level when the Packers decided to draft QB Jordan Love in the 1^st round of the 2020 NFL Draft.  Some people couldn’t believe it, but they weren’t looking close enough.  All the Packers were doing was repeating what had worked before.

Rodgers went on to start every game the next two seasons, but this year was Jordan Love’s turn, and he showed the Packers that the plan does indeed work. Love not only led his team to the postseason in his first year as the starter — not done by Favre or Rodgers — but the Pack trounced the Dallas Cowboys on the road and almost took down the 49ers in San Francisco this past weekend.

Your family business might not be the Green Bay Packers, but that does not mean their succession story should be ignored.  Here are three thoughts to keep in mind when thinking about succession planning in 2024.

Succession Planning Meets Wealth Planning

Every year is important for family business succession planning, which is ultimately about maximizing and preserving the family’s wealth, not just determining plans for new corporate leadership.  The need for thoughtful and strategic planning is heightened due to pending changes to the estate tax exemption.  For 2024, the lifetime estate tax exemption is $13.61 million per individual.  After 2025, this amount is set to decline to $5.0 million, adjusted for inflation.  Due to this, many family-owned businesses are contemplating different strategies of asset protection, estate planning, and ownership restructuring to maximize wealth within the family.

While it is certainly possible that the higher estate-tax exemption amount could be extended or made permanent, wealthy taxpayers need to weigh the risk of inactivity if the sunset takes place.  The tax changes will not take effect until the end of 2025; however, successful family business directors understand that 2024 is the time to get the ball rolling. As we said last year, don’t wait to call your estate attorney on December 1, 2025.

Align & Plan Transparently

As the Packers have demonstrated, it is never too early to begin formulating a succession plan for your family business.  Family business directors must consider the family’s values and align the succession plan accordingly.

• What kind of business are we?
• What kind of business do we want to be?
• How do we create a strategic plan for the long-term success of not only the business but the family, too?

A clear understanding of what the business means to the family is essential if decisions about ownership succession planning are to be coordinated with family wealth protection.  The process of succession planning and/or transferring ownership is intricate and complex, but these conversations must include family shareholders.  Differing expectations among shareholders is a common point of friction within a family business.  Transparency with family members to understand shareholder needs is the most efficient way to combat this.  Communication determines the success of any relationship, and the relationships among shareholders of multi-generation family businesses are no exception.

Successful family business directors must balance the company’s needs with those of the family when making succession plan decisions.  Analyzing succession plan strategies and understanding your family shareholder objectives is not easy, but going back to the meaning of your family business will help provide a backdrop for making these decisions.

Flexibility

Rather than stress about the particulars, the goal is to create a framework for succession planning that guides the family and allows for the inevitable changes.  Working to create a succession plan with interim goals and reviews occurring at least annually will promote flexibility within the framework created.

Simply acknowledging that the owner’s participation in the business will end helps bring important conversations into focus.  The late Charlie Munger said, “All I want to know is where I’m going to die, so I’ll never go there.” Unfortunately for Mr. Munger and business owners, succession is inevitable. Having a plan for when succession becomes a reality is imperative for continuing on-the-field success. If an unforeseen event occurs, you will have a strategy in place to determine how the business will operate moving forward.  While you cannot plan for a disaster, you can have the framework for how to respond to such an event.

Flexibility is crucial if you ever find yourself in a position like this.

Conclusion

Every business has a succession plan, whether formulated or not.  Careful planning today can stave off heartache in the future. As the estate tax landscape evolves, family business directors must prioritize transparent communication and flexible succession planning to be prepared for potential adverse changes.  Successful family businesses need to evaluate succession planning strategies and family wealth management in light of their family’s growth objectives and business meaning.  Give one of our professionals a call today to help start preparing your family business’s ownership succession plan.