When people think about estate planning, people immediately think of what will happen to their property after they die. But estate planning covers much more than that. A competent estate planner will also counsel clients to plan for incapacity. Incapacity is when a person is unable to make financial and/or health care decisions for themselves. Incapacity can be caused by accident, disability, illness, or old age. And the fact is, in today’s world and with today’s medical interventions, the chances are that any one of us will be incapacitated at some point, either temporarily or permanently. In fact, the U.S. Department of Health and Human Services estimates that 70% of people currently turning age 65 will need long-term care at some point. So, how should you prepare?
This is the fifth in a series of five posts on incapacity planning tools available in Minnesota including Power of Attorney, Health Care Directives, Long-Term Care Insurance, and Business Succession Planning.
You have built a successful company. Maybe you run the whole thing yourself or you oversee employees, but you built it and you run it. What if something happened to you?
You need to plan ahead if you want to ensure your business will continue or will be competently wound up to protect both you and your clients. Planning will help you designate a person or people who would have the authority to run your business and take care of necessary financial transactions. Without proper planning, your business could fall apart while your family is forced to figure out the legal situation and/or how to run the business. Of course, the planning you need will depend on the size and type of business you own. Things to consider:
If you are the sole proprietor of your business and/or it relies on your professional services (i.e. doctor, accountant, photographer, architect, etc.), then it might not be possible for someone to step into your business. In these scenarios, you still need to identify a colleague or agent who can ensure that your clients are notified of the circumstances and bills are paid. This person could also wind up your business if the disruption is permanent.
If you own a more complex business, you need to do more planning. Consider the many hats you wear as owner and who would take over your duties. It often helps for you and your employees to brainstorm everything you do to identify all of your duties. You can use this list to think about which duties cannot be delegated to someone on your team. These remaining duties help you identify gaps in coverage. Then you can develop a plan to ensure you have appropriate back up and start grooming employees or partners to cover needed skills.
Larger businesses owners also need to consider how the business will move forward if you are no longer involved, either due to incapacity or death. Do you own the business entirely or are there other investors? Do you have a plan for getting your equity with or without closing the business? Do you have strong feelings about who should run the business? These questions are beyond the scope of this blog post, but you get the idea.
Business owners are too close to the situation to be objective. Hiring professionals experienced in business succession can really help. Family business advisors, tax professionals, and estate planning attorneys can help you avoid navigate the technical, emotional, and relational issues inherent in developing a succession plan.