Contributed by Lewis J. Walker, CFP®
The first Baby Boomers were born in 1946 as post-W.W. II America expanded with manifold opportunities. As the initial wave turned 30 in the 1970s, we saw bursts of entrepreneurialism as businesses were founded. Those born in 1946 turn 70 this year as they contemplate Required Minimum Distributions for retirement plans and incessant sales pitches from AARP. What to do with the successful privately-held businesses established by Boomers and others is a hot topic. It’s called succession planning, and it isn’t only for business owners, professionals, and key persons. Succession planning is important to you, no matter your position.
Think about it. Death or incapacity is not a respecter of age or position. You are important to somebody. Somebody loves you and cares about you. Someone depends on you. What roles do you play in life? You may play multiple roles, as a husband, wife, partner, mom, dad, son, daughter, breadwinner, family head, leader, key person in an enterprise, etc. What happens if you are taken out by disability or death? Who will succeed you? Have you provided resources for successors in your myriad roles? How will you provide for continuity, so that those who love you, need you, and depend on you can carry on?
In business, owners and key persons must focus on “continuity and succession” to make sure the enterprise continues to thrive after they are gone, whether in retirement or from death or disability. Buy-sell agreements are hammered out, valuations of the business are kept current. Often insurance plays a role in providing important funds for the business as well as heirs in case of death or disability.
God in his wisdom reminds us periodically that we are mortal. In 1 Kings 19, “The Lord said to Elijah, ‘You shall anoint Elisha, son of Shaphat of Abel-meholah, as prophet to succeed you.’” Elijah obeyed, anointing Elisha...a succession plan! You are called to do no less.
Do you have a plan? Do you have a will which spells out actions to be taken after your death? If you have children, have you designated who will raise them if you and your spouse are killed in common disaster? Do you carry sufficient life insurance to provide for the raising of your kids or for a surviving spouse or other loved ones who may have to step in? Have you incorporated trusts for minor children?
You insure your car and home. Have you insured your income with adequate amounts of disability insurance? Have you protected your net worth with adequate levels of Umbrella Liability insurance to offset litigious actions?
Do you have current powers of attorney for assets and health care that allow someone to step in and deal with health care matters or assets, such as paying bills if you cannot due to serious illness or injury? A will only works when you are dead. If you have complex affairs, or out-of-state property, a Revocable Living Trust may be in order.
Succession planning never is easy. A business owner may have trouble letting go of his or her baby, as “no one can run this business like I can!” When people tell me they will never retire, the answer is, “Yes, you will. You may go out the door on a gurney, but you will retire.” Business owners often are so busy working in the business, they fail to step back and work on the business.
A parent thinks, “No one can raise my baby like I can.” What if someone has to? Would you rather declare what you want in a will, or would you prefer that a court decide? Everyone has a will. If you do not write your own, the state has one for you. Your survivor is unlikely to be happy with that outcome!
In today’s world, at 5%, it takes $1,000,000 to produce $50,000 per year in cash flow to a survivor, $4,167 per month. Will that replace your paycheck? Will that replace you as a key person in an enterprise?
God told Elijah to appoint and train his successor. What is that little voice in your head telling you? Procrastination is not a plan. It's planning to fail!
Lewis Walker is a financial planning and investment strategist at Capital Insight Group; 770-441-2603. Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of SFA which is otherwise unaffiliated with Capital Insight Group. This information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. There is no guarantee that any opinion or suggested possibility will happen.