Pub. 3 Issue 4

9 SPRING 2016 N ADA Forecasts a Record 17.7 Million New-Car Sales in 2016,” read the January 8, 2016 National Automobile Dealers Association press release. 1 The value of new car dealerships has risen; one of many good reasons to start preparing your business suc- cession plan. DE FACTO SUCCESSION PLAN For those of you who have not gotten around to preparing an estate plan, including a business succession plan, you may be surprised at what the laws of the State of California impose on you. Generally speaking, if the assets of an individual and his or her spouse are considered community property, then the spouse will inherit the individual’s share of the assets after death. If, instead, the assets are considered the individual’s separate property, the surviving spouse could inherit as little as 1/3 of the assets with the individual’s children inheriting the remainder of the assets. 2 These outcomes may or may not be what you envision for the ownership and operation of your dealership after your passing. By implementing an estate plan, complete with a business succession plan, you can decide how the dealership should pass and who should have the opportunity to operate the dealership after your death. BUYING TIME Someone once opined, “Do not regret growing older. It is a privilege denied to many.” No one can predict when he or she will become disabled, become unable to work or will die. Establishing a business succession plan now allows you to select and groom a successor (potentially a spouse, a child or a trusted employee) to take over after your exit. In some cases, early selection allows you to realize that the chosen successor is not a good fit and to select an alternate. With time, the successor has the opportunity to grow into his or her position rather than stepping into the role following your death when emotions run high and the death could usher in an exodus of talent from the dealership. Further, if you desire to sell the business to an employee, allowing the employee to buy in over time ensures that (i) the employee reaches the 10% to 15% ownership threshold required by many manufacturers AN OUNCE OF PREVENTION: Planning Your Business Succession to Avoid Future Problems BY BLAINE M. SEARLE, FERRUZZO & FERRUZZO, LLP