Succession planning and its nuances.

By: Fernando Lucena
Fernando Lucena

Despite the morbidity of the matter, Succession Planning is the necessary agenda and the most efficient mechanism to avoid true family and business disasters. 

            Entrepreneurs seem to be immortal (or at least think they are).

         His ideas, at least, are built on the eternal, the ethereal movement of conceptions, goals, hypotheses, etc. One-eighty-month plans, twenty-year installments, when you can't know if five more await them: all normal for such people, they don't think they die.

         In waging daily wars, uninterrupted problems, they never have time to reflect on what will become of their companies after they leave. Perhaps this is why many do not have the care or the least legal preparation for the end of their ephemeral passages on earth.

         To talk about this subject (succession planning), even, is synonymous with revulsion, as an omen or bad luck, and almost unanimously preferred to avoid it.

         However, when such entrepreneurs hear of disastrous successions, sudden closures of large companies, inventories that take twenty or thirty years to complete, or real family wars., all caused by the death of the then business owner, they agree to discuss the matter.

         And they accept it because none of them would like to see a lifelong construction go down the drain, to have their children perishing or the widower in despair when prosperity ruled during their lifetime.

         At that time, they are looking for lawyers, accountants and economists to try to create a solid succession framework through which to reduce risk, set a predetermined step by step for the company or the business, and finally have the peace of mind. that was worth the effort of a lifetime.

         Fortunately, the probate area has matured infinitely in the last decade, especially in business, and there are already numerous positive scenarios to apply to legal entities, sparse assets, trades, and so on.

         Even in very personal businesses, such as medical clinics, offices, offices, it is possible to structure a sustainable succession planning, with a perennial continuity, with no need for the participation of the heirs or, in participating, in an environment prepared prior to their arrival.

         From this point of view, Gladson Mamede and Eduarda Cotta Mamede even say that “succession planning in such cases is an act of love”, so that “early definition of the transfer of ownership procedures, when properly executed, creates an environment conducive to harmony ”.

         In this tune, Augusto Cesar Fontes Assumpção, in his own article, accurately points out the main objectives of succession planning:

  1. Rational destination and preservation of goods;
  2. Preservation of family business activity;

iii. Quick release of assets and assets;

  1. Prevention of succession discussions and dispute over inheritance.

         These are unquestionably laudable goals that go beyond the initial aversion that the subject generates, and make it clear that succession planning should be the general rule in all families, especially those that survive business.

What's more, notwithstanding all the benefits already noted, there is still the economic-tax advantage, as equity-oriented business structures (aimed at a more fluid succession) can reduce the incidence of certain taxes, such as Income Tax or Tax. Transmission Cause Mortis.

It turns out that in a country where financial education does not even exist in academic and school settings, how can it require documented and in-depth succession planning from its citizens? Impossible.

Thus, in the mission of lawyers and counselors of these people, we end up encouraging this initiative, mainly because we gradually become the trusted lawyer of the family as a whole, and we care about their future, and also who depends on them ( employees, service providers, partners, etc.).

This concern becomes more incisive when we become aware of contingencies potentially harmful to the succession unfolding, such as the existence of children out of wedlock, lack of interest in the continuity of the company's business, relationships of “de facto partners” interested in entering the patrimony. or even veiled disputes over goods to be left when the entrepreneur is still in life.

These are time bombs whose activation occurs immediately after death, and the effect is one of total chaos, with family members divided (each with his lawyer and solid intransigence), demanding a position from the widower, who is Overburdened by numerous responsibilities, business without leadership (or sometimes lacking confidence in new leadership) is the worst case scenario that could be avoided with extra care by the entrepreneur while in control of the family business. .

Thus, we always recommend to our clients to consider the possibility of organizing succession planning, and we present the possible modalities, from the simple traditional will, to the creation of a holding company, able to house the family assets, with a predisposition. of hereditary succession.

The definition of the modality will depend precisely on the quality and quantity of the assets involved, since their allocation or destination in a given structure may imply the need for contracts, deeds, constitution of legal entities, etc., and this complexity is often the determining factor. to establish the cost of planning.

We also know that it is somewhat discouraging for entrepreneurs today to incur costs and obligations (in times of insecurity and persistent crisis) to avoid future and sometimes even hypothetical problems (of their descendants, spouses and the company itself). the most widely used argument for evading succession planning.

It turns out that in addition to the countless possibilities of saving by tax reduction, peace of mind, which is philosophically priceless, will remain unharmed, the same as we feel in the insurance contracts of our cars, houses, health insurance, etc .: always better that nothing happens, but if it happens, it will be with the guarantee and the ideal of the best possible scenario, for all involved.

Here, as I said, it is about caring for the family, be it blood or life, perhaps because there are partners practically brothers, employees practically children or even godparents, marriage, in short, it is with them all the concern of not letting everything fall apart after departure.

Thus, the invitation to know the initiative and the warning to prevent problems is always made by us, with all these reasons above, because it is unequivocal the superiority of the advantages over the disadvantages in the case of succession planning.

Finally, let us remember the popular saying that “better safe than sorry ”especially in this case when remedy will be impossible to the departed. Much better to seek the fluid and harmonious path for those we love, at least as the attempt, in life and time, to help them on their path.

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Fernando Lucena

Specialist in Private Law, Master in Law from UFRN. Experience in complex litigation and in the management of administrative and judicial proceedings in the civil areas for individuals and legal entities, corporate, tax and labor.