In this time of social distancing and economic uncertainty, the last things you, as a business owner, may be thinking about are your succession plans. More immediate concerns about just keeping the doors open and the lights on are probably higher on your list of priorities. On the other hand, perhaps the current global circumstances have really made you examine your plan (or lack of thereof). What would happen in the event you were not able to work due to your own illness or a required quarantine as a result of contact with a sick family member, employee, or customer? Who would take over the business in the event of a premature death of an owner or key employee? How do you want your family taken care of and are the necessary documents in place to carry out your wishes?
If these questions concern you, now may be the time to put some thought into this important, and necessary, issue. Some factors to consider:
- Make sure that your succession plans have been documented in writing. If not, work with an attorney who specializes in estate and business planning to create the necessary documents. These may include a will, trust, powers of attorney, and a buy-sell agreement, but will vary depending on your circumstances.
- If you already have documents in place, review them to make sure they are up to date and continue to reflect your wishes.
- Evaluate sources of funding needed to complete the plan. Life insurance can provide an immediate source of funds upon the death of the insured (subject to the policy’s two-year contestability period). Permanent polices (such as universal life) offer the additional benefit of a cash value, which can accumulate over time. These funds may be accessed in future years for planned or unplanned expenses through policy loans or withdrawals.
Although the past few months have caused isolation for many of us, in some ways, the world has become more connected. Companies continue to do business remotely through e-mails, phone calls, and online technology. Many attorneys can meet with you and even execute legal documents (like wills or buy-sell agreements) remotely by video conference. If you need life insurance to fund your plan, know that life insurance companies are still operating — paying claims, and also underwriting and issuing new policies.
Take advantage of these unique circumstances to consider your options and create or update your succession plans.
This article is for general information and risk prevention recommendations only and should not be considered legal, coverage, financial, tax, or medical advice. The information may be subject to regulations and restrictions in your state. There is no guarantee following these recommendations will help reduce or eliminate losses. The information is accurate as of its publication date and is subject to change. Qualified counsel should be sought regarding questions specific to your circumstances. All rights reserved.
Published Date:April 17, 2020
Categories: It's Your Life