Creating Family Equity: Financial Strategies for Automotive Dealership Transitions

April 24, 2024

Succession planning in automotive dealerships often involves complex family dynamics, especially when there’s a generational difference in involvement. In a recent episode of Dealer News Today, attorney Jake Pollack, an expert in Business Succession Planning, sits down with our CEO and Founder, Dave Cantin, to shed light on addressing this issue by leveraging financial tools like life insurance and private investments to equalize value among family members.

We’ve experienced many instances where one child or family member is actively involved in the dealership’s operations while others pursue different career paths. This discrepancy can create challenges when it comes to fairly distributing assets and responsibilities during succession planning. However, Jake emphasizes that it’s crucial to ensure equitable treatment among all heirs, regardless of their level of involvement in the business and offers insights on how to accomplish this.

One strategy Jake suggests is utilizing life insurance policies to offset differences in inheritances. By designating the active child as the primary beneficiary of the dealership’s equity, the other children can receive equal value through life insurance payouts. This approach not only balances financial distributions but also acknowledges each child’s contribution to the family’s wealth.

Private investments offer another avenue to equalize inheritances. By allocating additional assets or shares in other ventures to non-active children, families can mitigate potential conflicts and ensure a fair division of wealth. Jake underscores the importance of involving M&A advisors, financial advisors and CPAs in crafting these solutions to maximize their effectiveness.

Watch the full Dealer News Today interview with Jake Pollack and Dave Cantin.

Implementing these strategies requires careful planning and consideration of each family member’s goals and aspirations. Open communication and transparency is critical throughout the succession planning process. Working with the advisors at the Dave Cantin Group and attorneys such as Jake Pollack, dealerships can create a collaborative environment helping families to navigate complex dynamics and lay the groundwork for a seamless transition of leadership and ownership.

By combining financial foresight with effective communication and mentorship, families can navigate succession challenges and secure a prosperous future for their dealership. Talk to an automotive succession planning expert at the Dave Cantin Group.  Fill out a contact form and someone will be in touch with you shortly.