Understanding Succession Planning vs. Estate Planning

Have you ever wondered what happens to your stuff or your business when you’re not around anymore? That’s where succession planning and estate planning come in. They might sound similar, but they’re actually different tools that help you prepare for the future. Let’s break it down in a simple way.

What is Succession Planning?

Succession planning is like making a game plan for your business. It’s about figuring out who will take over when you leave—whether you retire, step away, or pass away. Imagine you own a bakery in Jackson, Wyoming. Succession planning helps you decide who will keep making the pastries and running the shop after you’ve retired or passed away. It’s mostly used by people who own a business. The goal? Keep things running smoothly without you while minimizing the burdens of transition—including tax burdens.

For example, if you pick your daughter to take over the bakery, succession planning makes sure she knows what to do and has everything she needs—like legal ownership and management authority, recipes, money info, and customer lists. It’s all about the future of your work.

What is Estate Planning?

Estate planning includes succession planning, but it is also more personal. It’s about deciding what happens to all your things—like your house, business, car, savings, or even your stamps collection—after you pass away. Think of it as writing down your wishes so your family knows what to do with your stuff. When done properly, estate planning makes it so your family has to follow your wishes. And it’s not just for rich people; everyone should make an estate plan!

For instance, you might say, “I want my brother to get my bike, and my mom to get my savings.” Estate planning uses tools like a will (a paper that says who gets what) or a trust (a special way to hold and give away your stuff). It’s all about your personal belongings and making sure your loved ones are taken care of.

How Are They Different?

Here’s the big difference: succession planning is about your business, while estate planning can be about your business, but it is also about your personal stuff. Succession planning keeps a company going strong, while estate planning makes sure your family isn’t confused or fighting over your things after you’re gone.

Let’s say you own that bakery and a house. Succession planning picks who runs the bakery, while estate planning decides who gets the house (and the bakery too). They can overlap a little, but they focus on different parts of your life.

Why Do They Matter?

Both plans help avoid messes later. Without succession planning, your business might close down because no one knows how to take over. Without estate planning, your family might argue over who gets your stuff—or the government might decide for them, which isn’t fun for anyone. Planning ahead keeps things clear and simple.

References

[1] Small Business Administration (SBA) – “Succession Planning Basics”

[2] American Bar Association (ABA) – “What is Estate Planning?”

[3] LegalZoom – “Succession Planning vs. Estate Planning: What’s the Difference?”

[4] Nolo – “Why Estate Planning Matters for Everyone”