Law Times

PAGE 12 Hospitals doubling as estate planning hubs BRIEF: SUCCESSION PLANNING ing to advisers in the field. Clay Hudson, a partner at the H BY MICHAEL McKIERNAN Law Times ospitals across the na- tion are doubling as succession and estate planning hubs, accord- Toronto office of Shibley Righton LLP, says clients are more likely to get down to the business of dis- cussing the future of their assets and interests aſter a confrontation with their own mortality. " think about death," he says. "It' and they don't want to deal with it. In our office, we have a lot of law- yers here doing wills for people, and they all tend to be people in crisis. They wait until they're quite sick until they do this." The situation is similar in Canadian family-operated busi- nesses, according to Larry Klar of private equity firm Argosy Part- ners Ltd. He' A lot of people don't want to s not part of their agenda, the succession fund, which invests in owner-operated companies to help them get through a transition in ownership or to plan for future succession. Klar says clients are oſten seek- ing liquidity for a buyout of reluc- s managing partner of tant partners who want to exit the business for a variety of reasons. That includes long-time operators who have had enough or less ac- tive partners looking to cash out their shares. "This can happen is someone through divorce or really any life-changing circumstance that affects their need for liquidity, which inevitably is going to affect the business," says Klar. He says that kind of reactive sick, tired, because going arise when people have different agendas," says Klar. He prefers to get on board "Conflict is always going to with a company long before cri- sis strikes in order to get owners thinking about how it will go on without them at some point in the future. "The time to address succes- succession planning is a recipe for intensified strife among family members with compet- ing interests. sion planning requirements and objectives is when you don't have to — when you're healthy, not when you're under the gun be- cause you're ill or a family member is ill, SUCCESSION, TAX AND WEALTH MANAGEMENT IN 2012: WHAT YOU NEED TO KNOW SPECIAL DINNER PROGRAM Th e Rosewater Room, 19 Toronto Street, Toronto Tuesday, October 2, 2012 4:00 pm – 7:30 pm Th is unique CPD accredited program, co-sponsored by Carswell, a member of Th omson Reuters Canada Limited, will provide practitioners and industry participants alike with the practical hands-on knowledge you require for your practice and for your clients. Th e program, delivered by leading legal, accounting and business practitioners, will familiarize you with practical tax and estate planning, wealth management, valuation and succession management techniques. Tom McCullough, MBA, CIM, CSWP, CFBA, Chairman and CEO, Northwood Family Offi ce LP and Northwood Private Counsel Inc. Dennis Leung, B. COMM, CA, CBV, CF, Senior Director, Campbell Valuation Partners Limited and Veracap Corporate Finance Limited Gerry Fields, LL.B., J.D. President and CEO, CORNERSTONE GROUP ™ Speakers: Moderator: Nathan Wright, LL.B., MTAX, Manager, Taxation, Cadesky and Associates LLP TLA Members: $125.00 + $16.25 (HST) = $141.25 Peter Weissman, CA, TEP, Partner, Taxation, Cadesky and Associates LLP Non-Members early bird (before August 30th): $125.00 + $16.25 (HST) = $141.25 Non-Member after August 30th: $150 + $19.50 (HST) = $169.50 To register please contact: 416-327-5702 or cstephens@tlaonline.ca Total CPD = 1.0 Professionalism Hours 2.25 Substantive Hours TLA_LT_Aug20_12 1 12-08-15 9:53 AM spends between $3 million and $8 million on a stake in compa- nies that usually accounts for 35 to 50 per cent of the shares. The fund then puts together a board of directors to address strategic plan- ning, leaving the existing owner to continue management of day-to- day operations. "Succession planning takes discipline," says Klar. "It's a process, " he says. The succession fund typically not just an event." Doing the work earlier doesn't mean the key questions to ask a business owner will be any sim- pler. Klar says many business owners assume their children or another member of the fam- ily will take over. What they may not have done is made sure the intended heir actually wants to do the job and, more importantly, that they're capable of doing it. Other key issues include assessing whether customers are loyal to the company or to its principal and the level of nepotism in the busi- ness and its supply chain. "Those are quite uncomfort- able questions to ask yourself," says Klar. "We think in those, what you might call, cold terms. We're thinking in terms of an invest- ment proposition. The more fami- lies think like that, the more they give themselves options down the road. You're not really help- ing your shareholders, your fam- ily members or your customers if augusT 20, 2012 • Law Times People often wait until they're sick to address their estates, says Clay Hudson. you're not thinking through these issues." Hudson says testators who face up to tough questions about their estate before their death will reduce the chance of a messy fight over it later. "You see cases where the very wealthy family, the person controlling the wealth should sit down with the kids and take them through the whole thing so it' such a surprise when they die." One way for a testator to miti- the mother gets annoyed, gives the money to charities, and the kids contest the will, " he says. "If it's a s not gate strife associated with the execu- tion of a will is to make provisions for executor' sometimes-inevitable which covers the costs of defence and indemnity for damages aris- ing out of errors occurring during the administration of an estate, says many testators and potential executors are unaware of the level of personal liability they face in the performance of their duties. With estates that involve real es- tate or significant investments, the risks of a wrong move can be extremely costly. "They get a deer-in-the-head- lights-kind of look when it's ex- Myron Neufeld of ERAssure, s insurance. plained to them the tremendous amount of effort and challenge in the role they have ahead, so it offers them a piece of mind, Neufeld says. He says it' " and risky for people who transi- tion into the executor role having held a power of attorney late in the life because of the tighter restric- tions involved with the new role. "The average executor might s particularly difficult Is your client ready for a newpartner? The Succession Fund™buys shares from selling shareholders in owner-operated businesses. For more information call Larry Klar, (416) 867-8090 or e-mail klar@argosypartners.com good at this," says Neufeld. Lawyers also like the idea, ac- cording to Neufeld, who says it's s no chance to get "like a second layer of errors-and- omissions insurance for them." "If, for some unforeseen reason the executor is challenged, usually what happens is the lawyer gets brought into the mix because they become the default expert in the process, regardless of whether they were involved in the deci- sion-making or providing guid- ance, www.successionfund.com Argosy_LT_Nov7_11.indd 1 www.lawtimesnews.com 11-10-28 12:17 PM our right of subrogation against them. So if we defend, we waive our rights to chase the lawyers." LT "As part of the policy, we waive " he says. do it once or twice in their life- time, so there' ™Argosy Partners Ltd.

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