Effective Strategies for Success by Chapin Hill Advisors, Inc.
Kicking the Can Down the Road?
Tax Deadlines…
If we didn’t have deadlines created by the IRS and face potential penalties and fines, many of us would probably delay our tax filings. But since we have those deadlines, we get it done. It may be at the 11th hour and we may take advantage of extensions but eventually it becomes enough of a priority that we take time away from day to day business and focus. We typically seek out the assistance of a qualified professional to whom we send our Quickbooks files, 1099’s, payroll information and other pertinent data in order to file our returns. .
Financial, estate and succession planning has no deadline. So many business owners continue to kick the can down the road. “I’m never going to die” and “I’m never going to retire” are two phrases I hear often. Another is “the only way I’m leaving here is feet first”.
When you address your long term financial goals, it can bring up discord among family members, guilt over not having saved more, worry that there is not enough to retire and a fear of what retirement might bring. Fear of mortality plays a role as well.
A Case Study….
Last year I was meeting with a business owner who I was shocked to learn was 88 years old! He was young at heart and had a funny sense of humor and a wealth of stories. His business involves running an annual event which consumes his life. His entire house is full of photos, catalogs, past awards, brochures and other paraphernalia about various parts of his business.
His daughter assists him on the administrative side and one son helps out with the bigger picture. He has another son to whom he does not speak. He is a widower and this keeps him happy and occupied as well as producing a multiple six figure income annually.
We totaled up his net-worth and what he could potentially receive from selling his business and it was a pretty big number. His will was over 50 years old and his wife had passed, his children were now adults and there were grandchildren as well. If something happened, much of his old will would not be pertinent.
When I asked him how he felt if his daughter were to inherit “x” millions outright, he was horrified. He stated that she was a “flower child” and would run through the money immediately.
It is all in the details….
His business had no succession plan, no agreements in place with various important parties and no one knew where things were and how they operated except for him. He had sole access to the company bank account and I will bet no one had power of attorney for his personal accounts. While it is wonderful that he is alive and loving what he does, his situation was one of the most critical I have ever seen in terms of needing to address his estate planning and some sort of succession plan for the business.
Alas, no one wants to think about dying. He happens to be the one who said the only way he was leaving the house was “feet-first”. He never committed to the process preferring to not think about what might happen.
I often tell folks that getting sick is perhaps more hazardous for your family members than dying. While death is tragic, it is final and often there is life insurance in place and even without current wills, the State will administer the estate or appoint next of kin.
But being ill for a long period of time creates stress and strain on immediate family. All too often, panic can ensue as access to bank accounts must be attained, health care proxies need to be in place and ongoing care can be expensive so assets must be in place to pay for care. Siblings may start to fight over how to care for their parents. Step-mothers and children may also become adversarial.
Protect What You Built…
Estate planning and succession planning takes place over time. It is a process. Typically, we work with a client for a year or more to achieve their biggest goals. We start with the most critical risks and aim to mitigate those first. After getting that process in motion, we attempt to approach the bigger picture and gradually execute everything needed for a smooth transition. We bring in other experts who are tested and experienced making execution easier.
We can put almost anything in place but we need to know what you want to do and what you have to work with first. Just because you approach succession planning does not mean you will be selling your business and off to play golf 365 days a year (unless that is your goal). There are many ways to stay active including opening up a family office or starting a new venture.
But you owe it to yourself and your family members to protect what you spent all these years creating and building. So take action now! We are happy to help.
