By M Keywood Deese, Senior VP & Trust Officer, Vision Bank, NA of Ada, Oklahoma
Statistics reflect that over 55% of business owners die without a will, and that only 15% of family-owned businesses make it to the second generation. If you want to make sure that your business will succeed you, it is necessary to establish an estate plan to facilitate that process.
Who will manage of the family business after the original owner’s death? Without a financial game plan for the succession of the business after “mom and dad” are ill or die, the lawyer and accountants will have to cope with the business mess later. That will cost the surviving family members a great deal of money. Failure to plan may doom the business and be a hardship on the employees.
Ask yourself these questions before you see your Attorney:
1. Who currently owns stock in the family business?
2. Who will be the number two person in charge of the business?
3. Is the estate plan (will or trust) for inheritance of the business up-to-date?
4. Should life insurance be purchased to provide liquidity to pay business debt or buy-out of shares owned by the deceased?
5. In case of temporary illness of the business owner, who has authority to run the business, sign checks, hire and fire etc. until he/she is well enough to return to work? This should be spelled out in the corporate bylaws or with a durable power-of-attorney document.
6. How will the business debt and creditors be handled in case of emergency? Does the family know about the loans and line of credit obligations the business has incurred while mom and dad have been in sole control?