Preparing for the Unexpected

Business Insights

If we have learnt anything over the last 18 months it is to expect the unexpected.

In the midst of dealing with the fall-out from Brexit, came Covid 19 - resulting in headlines highlighting numerous deaths and business closures.

Digging a little deeper, Long Covid has caused the numbers of unexpectedly early retirements to rise and younger being people too unwell to return to work. Staff shortages are consequently on the rise, exacerbated by the NHS contact tracing app sending people home. For many people, being locked down at home together has been far from romantic, and indeed in many cases seems to have put some relationships under irreconcilable strain.

The various medical, financial, and emotional impacts of this pandemic have highlighted the need to prepare ourselves for more change in the future.

We have learnt to protect ourselves, our loved ones, and our communities. Sometimes that means wearing a mask and maintaining social distance. Other times, it looks like making an estate plan. Estate planning is about more than protecting your wealth by drawing up a will. It provides for the guardianship of your minor children, establishes a trusted individual who can make financial, business, and medical decisions on your behalf in the event that you are incapacitated by illness or an accident, and may even include a prenuptial agreement. An estate plan will also communicate your medical preferences and end-of-life wishes, and leave a clear set of instructions for after you are gone.

An estate plan communicates the incapacitated person’s wishes and lays out clear guidelines for how to handle a challenging and emotionally-fraught situation. Who should care for the person’s minor children? Look to the estate plan. Who is empowered to speak to medical professionals, help in making decisions, and even be in the room? Check the estate plan. What about the home, the business, the bills? Who will keep things running? It’s all in the estate plan. Just making a few strategic decisions in advance can dissolve potential conflict among your loved ones.

Sadly, it isn’t just death or incapacity that can damage, our lives and those of our friends and family. Divorce, even the new “No-Fault” style of divorce due to come into force next April, can cause difficulties surrounding the care of children and how any assets of the relationship are to be divided. If there is either a pre-nuptial agreement or an estate plan in place it can help, although the interests of the children override any other considerations previously determined.

Then if you become ill or die, who will take care of your business? Who will pay your bills? Do they know where to find your assets? What about your insurance policies? All your various assets need to be gathered, organized, and placed into the context of a plan.

The need to have a plan is exacerbated if you are a small business owner. What will happen to your business if you unexpectedly die or become incapacitated? The company’s suppliers, customers and employees could all be severely impacted if you have not made plans for unexpected death or incapacity.

In the case of the business owner or main decision maker becoming incapacitated by illness or accident, with an estate plan, their wishes are clear and the business can continue to function while the situation is resolved. In the case of a death, even if there is a will in place it can take time to receive probate, with an estate plan, the person’s wishes are clear, and the business can keep trading until the will is finally proved.

It is always advisable to have more than one officer of the company named in the estate plan to ensure that someone can take control in the event of an unexpected death. If there is more than one shareholder in the company, it is advisable to consider having in place a shareholder’s agreement, to determine what happens on the death of a shareholder and whether any surviving shareholders should have first option of buying their shares. In family businesses succession planning to identify and nurture those who will ultimately take over is essential.

An important part of inheritance planning, particularly for small business owners or shareholders is because it is possible, by planning ahead to substantially reduce the Inheritance Tax payable.

Planning ahead to protect your family and employees from unprecedented stress and uncertainty is surely reason enough to have an estate plan in place.