4 Lessons on Succession Planning for Entrepreneurs
When it comes to long-term planning scenarios for entrepreneurs,the eventual goal is to be able to draw an income without working. That could happen in your 60s, as is typical, or it could happen earlier if you're a millennialwho embraces the popular F.I.R.E. (Financial Independence Retire Early) movement, which prioritizes limiting expenses and maximizing saving and investing. Whether you're doing that or embracing traditional approaches to retirement planning, the bottom line is you're thinking about retirement. But something you might not be thinking about and should be? Death and succession planning.Here are fourlessons on succession planning for entrepreneurs.
Discuss financial decisions
When you start thinking about succession planning, you should have an idea of who your beneficiary might be. 58003 Communicate or documentwhy. You split up your income across multiple accounts? Communicate or document why. You want to make a big purchase or take a vacation? Communicate or document why. This is especially important in situations where your business'income is what primarily supportsyour beneficiary. Communicating the "why" behind financial decisions helps to establish an awareness and a cadence so that when you are no longer the driver, your heirs or beneficiariescan take over without missing a beat.
At a minimum, create a will
Your will can help to establish the flow of your assets as well as make said assets easy to locate and identify. Maybe you had an emergency account somewhere that no one else knew about, or maybe you maintained separate accounts solely in your name. A will should have a list of banks you bank at, account typesand even balances so that your beneficiaryisn’t looking fora needle in a haystack. Your will can be as detailed or basic as you desire, but at a minimum it should state your wishes and intended beneficiaries. You shouldregularly review and discuss the details of your will with your chosen beneficiary.
Establish co-ownership or power of attorney
Each designationcomeswith similar but very different benefits. Assigning your beneficiaryas co-owner ormanaging member allowsthem to make decisions as if they were you, completely independent of you, with all the same rights and privileges. As pOA, your beneficiary will have similar rights to transactions and balancesbut some limitations. They’ll need to prove their status as power of attorney and usually will step up to make decisions in the event of your incapacitation. A major point to note with power of attorney is that the authority granted is limited to your lifetime, meaning once you die the power of attorney becomes useless. Co-owner status will grant your beneficiaryrights of survivorship in the case of personal bank accounts and allowthem to continue to access balances and transactions after youare no longer here.
Death is a taboo topic that nobody wants to talk about, especially when you're talking about yourself. Like personal finances in general, people tend to bury their heads in the sand with an out-of-sight, out-of-mind mentality. This is a mistake, as death is an eventuality. There are a variety of insurance plans to choose from, and a qualified life insurance specialist will be able to help in selecting the best policy to cover the costs associated with your death and continued support for your beneficiariesas they navigate the grieving process. Spontaneous GoFundMe campaigns are not an acceptable replacement for coverage, regardless of the amount they raise. There are various formulas that can determine what sufficient coverage looks like for you, whether that means covering debt, replacing your income or simply covering your funeral arrangements.Structured carefully, a life insurance policy is the ultimate life hack for generational wealth building.