by Jerry Leemkuil, Association Risk Management Services, Federated Mutual Insurance Company
As a spouse, parent or grandparent, have you planned for your family’s long-term future in the event of your premature death or disability? As a business owner, have you taken steps to ensure a smooth transition of your company after you are no longer involved? You may be thinking, “I don’t have enough assets to worry about an estate plan,” or “my co-owner knows what I want to happen to my share of the business,” or even “I have plenty of time for that, I’ll do it later.” Surveys show that you’re not alone:
- According to a 2019 Caring.com survey, 76 percent of respondents said that having a will was important, yet only 40 percent actually had one. The most common reason for not having one was that they “just hadn’t gotten around to it.”
- According to a PwC Family Business survey, only 15 percent of family business have a succession plan in place.
Statistics show that only about 30 percent of family-owned businesses survive into the second generation. Twelve percent are still viable into the third generation, and only about three percent of all family businesses operate into the fourth generation or beyond. Research by the Family Business Institute indicates that family business failures can essentially be traced to one factor: a lack of business succession planning.
On the personal side, if you don’t have a will or trust in place at the time of your death, your assets will be distributed according to state law. These laws generally provide for your assets to pass to your immediate family members (i.e., your spouse and children), but vary significantly from state to state and are rarely in line with the wishes of the decedent. This is especially true if you have a non-traditional family situation. For example, in some states, if some your children are not the children of your current spouse, your spouse may only inherit a portion of your assets, with the rest automatically passing to your children. If you don’t have any children, your estate could be split between your spouse and your parents (again, in some states), regardless of how long you have been married. An attorney licensed in your state can give you more information about how these laws work where you live.
If you don’t currently have an estate and business succession plan in place, you should strongly consider the benefits of proper planning:
- Your assets will be distributed to the individuals you designate (and they will not have to argue about who gets which items).
- Assets will pass to them when you want (maybe at a certain age, when your heirs are older and better equipped to handle an inheritance).
- You, not a court, will determine who will take care of your minor children (the way you want them to be raised).
- A trusted family member can be appointed to make financial and/or medical decisions for you if you’re unable to do so yourself.
- If your plan includes a revocable trust, you can avoid the publicity and costs of probate.
- Your family will have an identified buyer for your business interests when you voluntarily or involuntarily (due to death or disability) leave the business.
- The purchase price and terms of the future sale of your business are negotiated and documented in a legally-binding buy-sell agreement.
- If your succession plan consists of passing the business to one or more children who are actively involved, you can make arrangements for non-active children to be treated fairly (with other assets or life insurance proceeds).
Don’t wait and become an unfortunate statistic due to lack of planning. Make sure you have a say in your estate and business succession plans by working with an attorney who specialize in succession planning. If you already have a plan in place, consider periodic reviews to ensure it still reflects your wishes in light of recent changes to tax laws, your family or your business.
This publication is intended to provide general information and recommendations regarding risk prevention only and should not be considered legal or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all risk of loss. The information presented may be subject to, and is not a substitute for, any laws or regulations applicable to your business. Qualified counsel should be sought regarding questions specific to your circumstances. © 2019 Federated Mutual Insurance Company. All rights reserved.
 Caring.com 2019 Survey, https://www.caring.com/caregivers/estate-planning/wills-survey/
 PwC Family Business Survey 2016, https://www.pwc.com/gx/en/services/family-business/family-business-survey-2016/succession.html
 “Family Business Facts.” Conway Center for Family Business, June 2014, www.familybusinesscenter.com/resources/family-business-facts
 Family Business Institute