What Happens When You Do Not Secure a Business Succession Plan?
Business owners put off creating a succession plan for many reasons. They may fear death and not want to talk about the inevitable. They may also be reluctant to give up control of the business during their lifetime, or they may have difficulty choosing a successor among their children or other family members. Even when it is understood who the successor will be and how the business is to be handled, failure to legally document your wishes often results in contention and costly mistakes.
What Are Your Options for Business Succession Planning?
Planning for the future of your business involves one of the following:
- Appointing someone to take over the business: Most business owners want to hand the reins to an adult child. This option allows you to still have some influence over the business and ensure that your values are maintained within the company. If your child isn’t ready to take over because of age or other factors, you may want to appoint a caretaker manager to run the business on a temporary basis until your child can assume the position. In some cases, there is no one in the family who is willing or able to take over, and you may then choose to place a professional manager in charge. This person would ideally be a trusted and experienced business person with whom you have worked in the past, or possibly an existing senior employee.
- Liquidating or selling the business: If you cannot find a suitable successor, you may want to close the business for good by selling company assets and paying off debts. However, liquidation is less likely to benefit you financially than selling the business to the current manager or an outside entity.
Every business owner needs some basic estate planning documents, even if you are not married, have no-one financially dependent upon you, or your business is not worth much yet. You should consider the potential value of your business, and recognise that it is dependent upon you If you have a spouse, life partner, or children, you definitely need to consider estate planning documents to provide for what would happen if you die or become incapacitated.
Here are the documents you may need to obtain:
Enduring Power of Attorney
This document gives another person power (your agent) to handle your finances in your absence. This may include paying your bills, negotiating a lease, dealing with employees, contractors & government departments, or working with your bank. You can give your agent power immediately or only upon your incapacity.
Medical Power of Attorney
Everyone age 18 and over should have this document. It names & empowers the person you want to make medical decisions for you, if you cannot do it for yourself. Do yourself & your loved ones a BIG favour, and create this now.
Your Will says who you want to receive your assets after you die, who should handle your affairs upon your passing, and who you want to be a guardian for your children. This must be formally executed to be valid, typically with 2 witnesses, depending upon state law. Everyone should have a Will.
Some of you may need other documents, such as discretionary trusts, property agreements, co-habitation agreements, pre-nuptial agreements, irrevocable trusts, special needs trusts, superannuation trusts or life insurance trusts.
Don’t draft these documents yourself
Estate planning is a specialised field, and doing it properly requires considerable care and preparation. Well-crafted estate-planning documents can clarify how things are managed if someone is incapacitated or dies.
To develop a proper fully-integrated estate plan, a proper analysis of family objectives, net worth, and income needs is necessary, so that the correct estate planning tools can be chosen. This really needs to be done by a lawyer specialising in estate planning in Adelaide, probably in combination with other specialist advisers regarding accounting, financial planning, insurance and funerals. Some people worry about the cost, but it is really an excellent investment in your family’s future harmony, because without it, things can get a lot more expensive if things get legally out of control. Long, protracted legal battles can tear families apart, especially if there are already some family tensions.
When considering the cost of your estate plan, you should have regard to factors such as the complexity of your situation, the amount of money at stake, your tolerance for dealing with legal issues, and your state law. If you have minor children, children with special needs, particular opinions about what you want to have happen, a solid net worth, extensive real estate, and/or a rapidly growing business, you really need to consult with a lawyer who specialises in estate planning, who can make sure your documents are up to date, tailored for the law of your state and/or country, and are property executed.
Death and taxes (and illness) may be unavoidable … but they don’t have to ruin your family or your business. Make the effort to protect the people you really care about. Call Genders & Partners to create a fully integrated Estate Plan. And do it NOW … before it is too late.
SPECIAL REPORT “7 Things You Must Know Before You Make Your Will”
In this report you will Learn:
Why home-made Wills can be a LOT more expensive than you might think.
The secret weapons used by the rich & powerful to protect their assets, and transfer their wealth two or three generations ahead.
How Estate and Trustee Companies make BIG money from “free” Wills.
The Most Common Estate Planning Mistakes, how they can cost your family a fortune, and How to Avoid Them.
The Elements of a Sound Estate Plan – why a Will alone is not enough.
How to Make Sure Your Assets Stay in Your Family and are not lost to creditors, lawsuits or ex-spouses.
How to guard against challenges to your Estate after you’re gone.