Dickerson Report | July 19, 2023 Credit The J.M. Dickerson Law Firm
The 3 Critical Documents Business Owners Ignore
I ran across a survey in Forbes magazine. It left me startled, even as a board-certified estate planning attorney; but not surprised. I’ll recap the results it had to say about 500 business owners surveyed nationwide:
80% didn’t have a power of attorney in place
Just 24% had a last will and testament
Only 13% had a living trust
65% of business owners had nothing at all
And as you might expect it, my solution to this would be to have these business owners seriously consider the risk they are placing themselves in when not seriously considering estate planning. While insurance can cover you for unforeseen events like medical emergencies, only estate planning prepares your company for real life worst-case scenarios.
Insurance, savings, and a four-leaf clover. These are the three elements business owners use to protect their business, right? Insurance and savings can keep many of your worries at bay, but even the most well-protected businesses can be exposed to risk if you don’t prepare core personal documents.
These documents — a will, living trust, power of attorney and others — get ignored if business owners fail to see the value they represent. As time goes by and their business grows, having these pieces in place becomes more than just important. It becomes critical.
Defining Success
At the core of a business owners’ success is a simple question: What happens when you’re no longer around, whether that’s through early retirement, incapacitation, or death? If you see yourself in this scenario, you need a succession plan. Have you thought about what you would do if you encounter a financial hardship or transfer your ownership to someone else? It might not be pleasant to think about, but succession planning doesn’t have to be a long, drawn-out process, either. It can be as simple as you want to make it. The most important issue here is putting a plan to paper and defining “succession” as you see it.
What you need As a business owner, you also have something else to think about. What happens if you have unpredictable medical events that hurt your ability to do business? That becomes more than just a financial question. It becomes a question of your company’s survival. That’s something the consumer electronics giant, Apple Inc., doesn’t have to worry about, which has a reported $250 Billion in cash reserves. But guess what?
You do.
Here are the three essential legal documents business owners should consider when drafting an estate plan.
Power of Attorney
You’re the person in charge. All decisions in your company must be run by you – until you need surgery that puts you out of commission for a few months. The questions start piling up. Who pays the rent? Who does business with your clients? Who accesses your bank accounts, and how? A power of attorney document allows you to transfer authority to another. The power of attorney will assign an “agent” to oversee your funds and make financial decisions on your behalf. This includes business operations, tax issues, stock transactions, insurance and even claims and litigation.
Living Trust
You put your life’s sweat into your business. Then you die unexpectedly. What happens next? No one knows, because you didn’t plan. Your property and other assets go through probate and someone else makes decisions about what you worked so hard to build. A living trust is the main tool in your estate-planning arsenal. Holding property in a trust ensures it will go to a trustee rather than through the court system.
Last Will & Testament
This simple document describes your intentions for your property and debt and perhaps even your burial wishes. Essentially, it’s the last “say” you’ll have in any Through a will, you can designate an executor to ensure your will’s terms are carried out. This should be someone you trust completely. Business owners are entrusting their executors with not only their family’s well-being but their livelihood, too. It’s an important decision that requires someone very close to you.
Creating or updating a succession plan is easier than you think. Drafting documents can feel uncomfortable, but the rewards are significant. For the short time business owners spend with a board-certified estate planning attorney, like myself, they gain a sense of security that goes beyond insurance and savings accounts. My client who have tackled this process usually find it easier than anticipated and the sense of relief is well worth the effort.
If you now realize that you have a longer road to protecting yourself and your business assets and legacy, or you have any other questions, we are available in person, by appointment or by Zoom.
In South Texas, call us at 956-791-5422 and in Central Texas call us at 830-302-4577.
Best Regards, Joseph Michael Dickerson Board Certified Estate Planning and Probate Attorney
Copyright (c) 2022 The J.M. Dickerson Law Firm, All rights reserved.
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