What is the first thing you think of when considering how to pass on your wealth?

Inheritance When a young successful professional from telecom background lost his life in an accident leaving behind his wife (home-maker ) and three children between four and 10 years of age, apart from the severe emotional shock, the family went through immense trauma since the deceased had not put in place any succession plan. While, the man had left behind substantial wealth, enough to secure their financial future, the family still needed to grapple with multiple challenges—how to consolidate scattered assets? Who will manage the assets for the children until they reach the age of majority? How to ensure that inheritance is not squandered away but is protected for the family’s long-term benefit? So, what is the first thing you think of when considering how to pass on your wealth? For most Indians, it’s probably a Will. Of course, that is the most traditional method but is it the right choice for you? What are the alternatives? And what are the advantages and disadvantages? Let’s consider the various options. The succession planning tools most often favoured in India are the Will, Personal Holding Company (PHC) and Trust. Apart from these, options such as life insurance and setting up a foundation are also used internationally. Will and Probate Where does a Will rank among all these choices? You should look at it as being the minimum measure you need to take. A Will is a legal document that describes how your assets should be distributed in the event of your death.  However, the actual distribution is controlled by a lengthy legal process called Probate. Derived from the Latin meaning to “prove the Will,” Probate can be cumbersome, time-consuming , in certain cases expensive and emotionally traumatic during a family’s time of grief and vulnerability. A further drawback is that your assets not only have to be made available for public inspection but they are also frozen and cannot be utilised, pending Probate. Revocable Living Trust Given the disadvantages of a Will and considering how important a well thought-out succession plan is, you should also evaluate other options. For instance, an increasingly popular alternative among those with substantial wealth is a “Living Trust” . Living Trust is often called a Revocable Living Trust.  As the name suggests, it can be revoked or amended by the person creating it (settlor) at any time while the settlor is still alive and remains competent. Importantly, when you set up a Living Trust, it manages and administers your wealth both during your lifetime as well as beyond. In other words, there’s no need whatsoever for Probate from the courts since your assets continue to be held within the Trust. Eliminating the Probate formality implies that your family privacy is maintained and administration procedures are minimised so no extensive time lag and no additional costs. Going back to the above case, had the gentleman formed a Trust, his family would have at least been absolved of the nightmare of collating the scattered assets and the accompanying administration. While there are many benefits to be derived from a Living Trust, there are also a few drawbacks. Though most of these are minor and should not discourage you, it helps to be completely informed of the disadvantages so that you can structure it appropriately.

Living Trust

Since a Living Trust does not come under direct court supervision, a trustee who fails to act in the best interests of your beneficiaries may, in some cases, be able to take personal advantage. In addition, the cost of preparing a Living Trust could, in some cases, be higher than the cost of preparing a Will.

However, this depends on the particular estate plan and the difference in cost may not be significant if the estate plan is complex. Refinancing, especially of property held in a Living Trust, can be slightly difficult, though it is not impossible and is more of a minor complication that can slow things down.

Perhaps the most important decision for you to consider in a Living Trust is your choice of trustee to act in your place. The trustee may be your spouse, adult child, other relatives, family friends, business associates or a professional fiduciary, such as a bank or trust company. Whoever you decide, it should be someone who will follow through on your wishes in an impartial manner and without compromise so that your wealth legacy endures for generations to come.

http://economictimes.indiatimes.com/quickiearticleshow/5681798.cms

Succession Planning: The leader you like or the leader you need?

Succession Planning: The leader you like or the leader you need?
Published: 6/02/2010 at 12:00 AM
Newspaper section: Business

One major factor in determining an organisation's character, direction and future is the character of its leaders. This is why leading organisations worldwide attach considerable importance and investment into finding good leaders, leaders who can respond to expectations and to the organisational direction and changing circumstances to create success and sustainable growth.

How can organisations be confident that the leaders they choose will be well-suited for dealing with the organisation, its challenges and future? What characteristics and qualifications should the organisation leader have? And what parameters and characteristics should be used for this consideration?

For almost two years, an alliance of APM Group and Hogan (a leading global company specialising in personnel evaluation) has done research in this area. The goal is to find the qualifications of leaders who will be suitable successors, leaders who will best be able to face a continuously changing business future and best be able to handle the current and future competition and competitive environment.

We started by finding information on high-performance CEOs in America, Europe and Asia. Initially, we could not clearly identify common characteristics and qualifications. So we narrowed our focus to good performance in profit and expansion of business growth. Finally, we obtained information on 55 leading organisations with double profit expansion every year.

We also studied 94 leading organisations that have shown the best succession planning. We considered what characteristics and qualifications the successors of these organisations had by specifically emphasising the people undergoing succession planning. We studied how the 94 organisations prepared their people and what qualifications the people had.

Next, we compared the obtained information with the information from the first 55 organisations to find similarities and differences. We also considered 405 middle talent managers who have been under talent management plans for five consecutive years.

These are the information sources I studied to bring that important and useful information to further exchange with readers.

The leader you "like" and the "ideal" leader: I have worked closely with executives of many leading organisations over my 18 years as a consultant, and one question I always ask is whether they use old information when selecting people or in succession planning. It is an issue I want all executives to consider.

Currently, leading organisations use the current situation or future plans to prepare and select qualifications and characteristics for new successors. The past is not usually taken into consideration.

Finding new characteristics and qualifications for organisation leaders is very important. It is a significant factor that affects the organisation model, business operation, strategy and future of the organisation for more than 10 years. Therefore, selecting a new leader is delicate and must be seriously done in an in-depth manner.

The leader must be both a person you like and the ideal person for the position. Organisations have to ask themselves what information they use when they make succession plans, whether they consider previous guidelines or future expectations.

Today, organisations have a forward-focus: they look to tomorrow and not to yesterday. In the past, old methods and old qualifications might have been successful and suitable. There is nothing wrong with methods and qualifications that have been proven successful in the past. But today's e-world revolves faster: we have to closely watch trading and business operations - every second, it seems.

Currently, the rate of change is fast. There are a myriad more factors, situations, information sources and data. And there are requirements with which we must be more careful than in the past. So we have to be careful when we ask ourselves if the leader we intend to select is the person we like and is also ideal for the position.

Today, organisations are focusing their readiness on those areas they expect to increase or change in the future. And they need to ask themselves whether the leader they are looking to can deal with those things. While many organisations still adhere to old models that used to be successful in the past, they need to ask whether those methods can still be used now.

Some of the old methods can - should - be kept, but they need to be carefully considered in the light of expected future events and changes. In those areas where the older methods will not work, organisations need to consider new requirements both in-depth and widely, in order to select the most suitable and most ideal leader.


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Arinya Talerngsri is managing director at the APM Group, Thailand's leading Organisation & People Development Consultancy. Write her at arinyat@apm.co.th

http://www.bangkokpost.com/business/economics/32439/succession-planning-the-leader-you-like-or-the-leader-you-need

Feud over family company is better avoided through careful planning

Saturday January 16, 2010
Feud over Syed Kechik’s millions goes to High Court
By NURBAITI HAMDAN


KUALA LUMPUR: The children of the late Tan Sri Syed Kechik Syed Mohamed Al-Bukhary have gone to court to fight over the RM400mil estate he left behind.

The High Court granted an injunction applied by his two daughters – Sharifah Zarah and Sharifah Munira – to prevent their half-brother Syed Gamal from interfering in Syed Kechik Holdings Sdn Bhd’s affairs yesterday.

Syed Gamal, 45, who is Syed Kechik’s only son from his first marriage, is not allowed to intervene in the administration, enter the premises and access the records and accounts of the company.

He is also barred from interfering in the duties of the company directors.

The sisters, who are directors of the company, were not present but were represented by laywer Datuk Vijay Kumar.

This is the second injunction granted by a court in the family saga that started after Syed Kechik’s death last year.

Syed Gamal had obtained an ex-parte injunction at the Syariah Court on Sept 14 to stop his 44% stake in the company from being sold or liquidated.

Justice K. Anantham, who presided over the High Court case in his chambers at the Jalan Duta court complex here, ruled that the Syariah Court had no jurisdiction over the company because it is a corporate entity.

Syed Gamal, who was with his cousin Syed Azman Syed Mansor Al-Bukhary, said his lawyers would appeal against the decision.

“I will continue with my struggle to pursue my rights according to Faraid law. My rights have been denied almost all my life. This is not a struggle for myself but also for my family,” he said when met outside the courtroom.

Syed Gamal was represented by his three lawyers – Atan Mustaffa Yussof Ahmad, Az-mi Tan Sri Dr Mohd Rais and Zulkifli B.C. Yong. Syed Kechik died at the age of 81 on April 10 last year.

His son-in-law is Al-Bukhary Foundation chairman Tan Sri Syed Mokhtar Al-Bukhary.

http://thestar.com.my/news/story.asp?file=/2010/1/16/nation/5483928&sec=nation

Setting your family meeting structure

Nothing is wrong with the living room for an annual family business meeting if you're talking about your immediate family, but consider these guidelines as your business evolves:

- Always have a formal agenda that all participating memebrs contribute to in advance.  As in any business meeting, you should be prepared with facts and exhibits, if necessary.  Distribute this agenda before the meeting so everyone can review it.

- Designate a facilitator for the meeting - in small groups, the responsibility can move around (it's good training for the kids), but as the group gets larger, you may want to work with a professional facilitator or someone who can manage the event without a stake in it. 

- Appoint someone to act as the meeting secretary to keep a running history of discussion in these meetings.

- Make it a priority to increase the growth and value of the company, and devote at least part of the meeting to report on how that's going.

- Set ground rules about anger and conflict, in family businesses, emotions run high, and unchecked emotion in family meetings can derail other critical business.

- As more family memebrs join the business, consider neutral territory if doing so makes the crowd more comfortable and facilitates discussion.

So your kids are in grammar school? Plan anyway

Considering how the transfer of assets will go in a family can never start early enough. 

Your objective is to preserve the value of the business and personal assets you've created, no matter how old you and your kids are. 

The uncertainty over the estate tax exemption (US) in the next few years means that the best idea is to discuss strategy now rather than later.

Most financial experts advise that you revise your estate plan every five years or as lifestyle issues change.

Remember, the estate and valuation issues with your business don't exist in a vacuum.  To ensure that the value of your business will benefit your kids and future generations, you need to do some very prescient planning.

Succession conspiracy in family company

Does your business look like this?

Ivan Landsberg, a Yale University expert in family businesses, coined the term succession conspiracy - how business owners, their spouses, their family members, and non-family co-workers either consciously or unconsciously make damaging decisions that foil the effective succession of the busines to the next generation.

He described three general types of family business management structures back in the 1980s:

Controlling owner:  A single owner is involved in every aspect of the business and makes critical decisions.  Typically little or no planning occurs for this owner's departure.

Sibling partnership:  Siblings may share leadership, or a lead sibling may be designated - or designated by default - to make most of the business's key decisions.

Cousin consortium:  This structure is common among some of the biggest family fortunes in the world.  When the business has been passed on to the children of prior sibling owners, eventually several branches of the family share ownership, and coalitions may be formed to create blocks of stock that represent more voting power.

Aligning with any of these ownership structures doesn't mean your family company is necessary sliding off the rails.  But if you recognise yourself in any of these structures, ask yourself whether the following also applies:

• The owner has created a succession plan that not only sets benchmarks for who the next generation leadership will be but also comes with full buy-in from all family memebrs, young and old, with a stake in the business.
• The owner and top family officers have spoken with family members recently either separately or in a group about their feelings about the business and whether any conflicts or issues need to be worked out.  Better yet, is there a formal meeting structure?
• The owner has helped craft - with experienced legal and tax professionals - a quality transition plan that allows her the money and freedom to work in the family business if she's asked or to comfortably start retirement or a new phase of her career.

Deciding What to do about the Family Company

Need to understand the followings:

Why parallel planning for the family and the business is crucial

Facts about family-owned companies

How families hurt their business's valuation without even knowing it

Ways to constructively manage family conflicts

Business owners should always have an exit or succession plan, no matter what stage of their business' lifecycle.

Entrepreneurs establish and grow their business for essentially one reason - reward.

That reward can come in many forms whether it be fulfilling a passion, gaining respect or recognition or achieving a lifestyle. One common trait through all business owners is that they want to build value.

We have seen many business plans, long or short, simple and sophisticated. However, a consistent fault with many is that they do not reference their actions or strategies against what impact these may have on the business value - short or long-term. When asked why, a typical response is that they do not know how to realistically value the business - hence, have no measurement tool.

At another level, we continually try to give the message to business owners that they should always have an exit or succession plan, no matter what stage of their business' lifecycle. Whether it be via family succession, management buy-out, trade sale or IPO, the plan for exit will or should largely drive the actions and strategies of the business to increase value.

So, what is a business worth? In very simple terms, it is the best price you can get at a given time. The price issue is long-standing. The seller wants to get as much as possible, the buyer wants to pay as little as possible, and the value lies somewhere in between. However, this is not always reasonable. For example, at a given time, there may be no buyers or investors that have expressed an interest. You should not therefore conclude that the business is worth nothing. So how can you arrive at a reasonable valuation, or if you are selling, a realistic asking price?

http://www.mondaq.com/australia/article.asp?articleid=68178