Financial advisors with experience and knowledge in business estate and succession planning have a significant opportunity to help business owners. As Gary Clark explains, advisors can be catalysts for developing and improving business owners’ succession plans.
A recent survey by TD Waterhouse of 600 small to medium size businesses found that only 24 percent of entrepreneurs had done some succession planning. The reasons for this lack of planning were that they were “trying to figure it out” or that they “have not addressed it.”
In its survey of members, the Canadian Federation of Independent Businesses (CFIB) found 33 percent had done what they considered succession planning. Of those with a plan, most plans were informal, not in writing, or hadn’t been shared with the intended successor. Meanwhile, 41 percent of business owners plan to leave the business in five years.
EVERYTHING BEGINS WITH THE WILL
It’s estimated that only 40 percent of people have a will. Of that 40 percent, a significant number were drafted a week before going on a holiday or just prior to having major surgery, with the intention of drafting a more thoughtful will down the road. Of those individuals with a will, 50 percent stated that their wills were not up-to-date.
Many wills are 10 to 20 years old. They name executors and trustees who may no longer be alive or who are unaware that they were named executors or trustees. Furthermore, those named may not have the financial expertise to manage today’s estate value.