Succession planning will help you get in front of catastrophic family feuds

But even when the stakes aren’t as high, questions of succession and inheritance can be just as contentious. When Nahar Singh Litt and Nihal Kaur Litt of British Columbia both died in 2016, their family discovered that their two sons were set to inherit nearly all of the $9-million Litt estate, leaving four daughters to share a small fraction.

The Litts had never shared their estate plan with their daughters and not only were the daughters surprised, they felt slighted. They’d each worked for the business and taken on the lion’s share of caring for their parents as they both faced health issues in their later years, court documents showed. Now, their family found themselves embroiled in a protracted and costly legal battle.

Both the fictional Roys of “Succession” and the real-life Litts stand as valuable examples of why it’s important to communicate your succession plans — while you still can.

When’s the right time to start planning?

Succession’s family patriarch Logan Roy made his first mistake by holding off on succession planning until retirement was already on the horizon.

“Obviously it's best to have something in place from the get-go,” says Jane Martin, an estate lawyer with Wilson Vukelich LLP in Markham, Ont.

She says business owners need to ask themselves: “If something happened to me today, would the business be able to keep running?”

If the answer is no, “it's a really good time to sit down with a financial planner and maybe a tax advisor, but definitely with an estate planner.”

At the very least, without a succession plan, your heirs could find themselves facing a major family feud, or a tax bill that is larger than it needs to be — or worse yet, a combination of the two.

Fair is not the same as equal

When dividing up an estate, you don’t necessarily have to make things equal to make them fair, experts say. For example, some children may have invested their own time and money in growing the family business and deserve to inherit it. Other families may have children with special needs who’ll need financial support for the rest of their lives.

But making sure you strike the right balance in your inheritance means keeping up with your finances. And the key, Martin says, is having inheritance and succession conversations upfront.

“Regardless of why there might be different treatment of your children in your estate plan, when it comes as a surprise after you die, it can lead to beyond just hurt feelings — it can lead to court battles,” says Martin.

The Litts’ case, Grewal v. Litt, made its way to the Supreme Court of British Columbia in 2019. The judge ultimately sided with the sisters, arguing the parents had a moral obligation to their daughters, and ended up dividing the estate more equally between the siblings.

Though it worked out well financially for the Litts’ daughters, cases like this can drive a wedge into families, sometimes permanently.

What was fair then might not be fair now

Jeff Halpern, a business succession advisor with TD Wealth in Toronto, deals with questions of fairness in inheritance every day. Recently, he helped a family with one son and two daughters. The son was slated to inherit the family business while the daughters would be left cash.

But the business had risen so much in value that the taxes his estate would have to pay when he died would significantly reduce how much the daughters stood to inherit.

While the will was fair when it was originally drawn up, Halpern says the increased value of the business meant the son’s inheritance would be about five times more than what either of his sisters stood to receive.

So Halpern helped them rebalance their plan. By separating the company’s real estate assets and placing them in a separate, new corporation in which the daughters were shareholders, the parents were able to “top up” their daughters’ inheritance.

Communication is essential

Martin says good communication is the most powerful tool to manage what could potentially become an awkward — or litigious — situation once you’re gone. And beyond making family dinners tense, it can also take a toll on the legacy you hope to leave behind.

“The worst thing is to have it blow up the family and possibly blow up the business,” says Martin.