With the passing of Aretha Franklin a few short weeks ago, the world lost a musical legend and cultural icon. Dubbed the “Queen of Soul,” she’ll leave behind a legacy that will shine through history, impacting music for decades to come. The famed singer also left behind a considerable fortune, with some estimating her estate to be worth $80 million. However, while family and friend grieve a tremendous loss, they also must contend with another reality – the absence of a will.
While many are surprised that Franklin didn’t have a will, she wasn’t alone. Prince, another musical legend, also left this world without a will, and as of April of this year, his heirs were still caught up in litigation over the musician’s estate – a full two years later. However, statistically speaking, they weren’t alone. According to a 2017 survey conducted by Caring.com, 58% of adults in the United States don’t have a will or living trust.
What happens when you don’t have a will?
At the simplest level, a will determines what happens to your assets and property after you’ve died. If someone passes without a will, decisions about who inherits assets or responsibilities pass on to the courts. How is that decision made? It depends on a variety of factors including whether the deceased was married/in a domestic partnership or if they had children, siblings, nieces, nephews, etc. To compound the issue, estate laws also vary by state.
In some cases, you may luck out and your estate will be distributed as you wished, but in many cases, that’s simply not how it happens. Without a will, heirs can fight — both in and outside of court – legal fees can add up, money and valuables can end up in the wrong hand, and the entire thing can become a long-standing financial and emotional mess.
This is particularly true for small business owners. Without a will or estate plan, the family members left behind can be forced to endure the consequence of inaction – business can cease, along with income; all assets and property will be held in probate; and if loved ones are left with anything in the end, it can take well over a year to see a cent.
5 Steps to Create an Estate Plan
If you don’t currently have a will or estate plan, you should consider starting one or speaking with an attorney who can help you along the way. However, many small business owners may find that these steps can help solidify the future of your business and your family.
1. Create a Will
If you take one thing away from this piece or the hundreds of nightmares fueled by the absence of a will, it should be to buckle down and write yours. This will create a clear (or close to clear) path for asset and property transfers. This should include information specific to your business to help determine who takes over the business or usurps your share. In addition to determining who receives what assets, you’ll also need to determine an executor (the person who manages the disbursement of your assets).
2. Document Account Details
In the case of your death, you will not be able to help loved ones or business partners access important files and accounts. As such, many experts recommending keeping a log of this information, allowing those whom you’ve deemed responsible and trustworthy to access your banking and financial accounts as well as any other accounts or files pertinent to your business operations (e.g., emails, social media, cloud storage, document sharing, etc.) Some choose to do this online, sharing access information with their executor or individual named the will, while others prefer to keep a paper copy in a safe or safety deposit box.
3. Write a Succession Plan
If you want your business to continue in your absence, as many business owners do, then a succession plan is essential. This creates a smoother transition by establishing who takes over various roles and duties. A succession plan can also determine what happens to your business. For example, if you don’t want to keep the business within the family, you can dictate your desire to sell the business upon your death. Whatever your plans are, keeping the business in good financial shape will be important to keeping the transfer as smooth as possible. Nav can help you find the best financing options to sustain the financial health of your business and prepare for such instances.
Whatever your goals are, it’s best to discuss your intentions with those who are or will be directly involved with the business to ensure that they are willing to take on the responsibilities and to guide them through some of the tough decisions they’ll need to make.
4. Consider a Buy-Share Agreement
Are you a part-owner in your business? What happens if you pass on and your share becomes vacant? That depends on a variety of factors, but without a written agreement, you’ll have no control over it. Buy-share agreements can provide guidance on everything from how much your share should/can be sold for to who can buy into the business. Though this is specifically referring to estate planning, and anyone with a multi-member business should consider the benefits of this agreement.
5. Determine a Power of Attorney
In your absence, business operations can come to a halt, leaving everything from payroll to bills unpaid. By trusting someone with power of attorney, you can avoid unnecessary disruptions during an already difficult time. If you don’t assign power of attorney, the probate courts will assign a guardian to manage your estate, but by determining who will fulfill this role ahead of time, you can provide explicit instructions and save grieving family members from taking on an additional challenge.
Death is an inevitable part of our journey here on earth, and when the time comes, many of us will have family in friends left to grieve the loss. This transition can be challenging enough, but in the absence of a will, the emotional and financial toll can be insurmountable. Though no one wants to admit to or think about their own mortality, doing so now can help your family, business, and legacy continue on.
This article was originally written on August 30, 2018.