The old adage goes: “Failing to Plan is Planning to Fail.” If you want something specific to happen with your estate you need to have it in writing. While we all know this, it is easy to put off, but the consequences can be extreme, especially for the loved ones of business owners.
Let me tell you about my client Patricia. Long before I knew her, she had married a man who owned a car dealership. During their marriage, Patricia had helped Frank build the company to 5 times its original size and they had sold it to a private equity group that owned other dealerships.
Within a year, the company was barely profitable and so Patricia and Frank bought it back per the terms of their original sale agreement. For the next 5 years, Frank was not interested in the dealership any more and rarely went to work, but Patricia went in every day and built the company back to better than it had been before. She worked hard to cultivate good management, hire great employees, and build strong customer relationships.
Meanwhile, Frank was working with his attorney on an estate plan. He was planning to leave the entire company to Patricia, whereas his previous will left 67% of the company to his daughter Priscilla, a 30 year old who had never stepped foot into the dealership.
And then, one night Frank had a stomachache and was having trouble breathing. Patricia rushed him to the hospital, but he died within the hour.
The estate planning had not been completed, and so 67% of the company belonged to Priscilla and only 33% belonged to Patricia.
After several company valuation fees, some lengthy court battles, and a myriad of other dysfunctional interactions, Patricia owed Priscilla $1.32 Million for 67% of a company she had built and worked in every day. She is still paying off the note with after tax dollars every month.
The “way” Frank exited his company was ugly and not at all what he intended for his dear wife Patricia.
Is it hard to find time to meet with attorneys? Is it unpleasant to think of your demise and how you would want your assets divided? Are there a million things to do every day that seem more important that getting your estate planning signed, notarized, and witnessed? Yes, yes, and yes. But you simply must plan and plan NOW.
“The afternoon knows what the morning never suspected.”
-Robert Frost
{Excerpted from 50 Ways to Leave Your Business by Sandra Finch, on Amazon soon in print and e-book format}