The Independent Advisor's
Succession Plan

What Happens if I Die Before I Retire?


Nobody likes to think about dying prematurely. It’s never a pleasant thought, no matter how you frame it, but it is something that business owners shouldn’t put off planning for, or sweep under the rug altogether. Much is at stake, not only for you but also for your family, your company, the people who work for you, and your clients. Do not neglect to include your business succession plan as part of your estate planning process.

At advisorRETIRE™ we are the experts in succession planning for financial advisors. Our experts will partner with you to navigate a succession plan, ensuring the future is secure for all involved. Contact us today to let us know how we can work with you.

Putting plans in place for succession, no matter where you’re at in life is the surest way to ensure your business continues after you die. Additionally, it will ensure protection for your family and heirs once you pass away. Here are some tips for avoiding some of the pitfalls of not creating a succession plan as part of your estate planning.

Write a Will

You might assume that when you pass away your business will automatically go to your surviving spouse, or children if your spouse is no longer living. Dying without a will (also called dying intestate) means the properties and assets owned by you, in your name, will be subject to probate. This means the court will divide the assets according to a formula set by the state, and not according to what the individual would have wanted, or the needs of the beneficiaries. The court can decide, for example, that the surviving spouse will get 50 percent of the assets and the children will split the remaining 50 percent, whether they are minors or not. Probate also means that your personal business will be made public, and the proceedings can take as long as two years.

Writing a will ensures your wishes are granted after your death, and that your assets are distributed in the way you see fit.

Protect Your Spouse From Creditors

If your spouse is a co-signer on your business loans, he or she is at risk for legal risk in the event of your death if your business has debt. If you’re a sole proprietor, the assets from your estate will be liquidated to pay off the debts of your company, which could leave very little (if anything) for your family. However, with an S Corporation, the deceased person’s estate becomes the owner of the business shares—while this can be great in some instances, if the heirs aren’t qualified to take over the company, this could spell disaster. In the case of an LLC, LP, or LLP, the plan is determined when the company is formed.

When you work with a well-qualified attorney to draft a trust, you’re protecting your heirs from your debts and ensuring that your money will go to its intended purpose. An irrevocable trust further helps protect your assets from creditors, transferring your assets to a trustee with instructions that are specific and direct the trustee on how to use the money.

Advisor, Retire, Financial Advisor, Succession, Succession Plan, Practice, Independent Advisor, Independent Financial Advisor

Create a Succession Plan

When you gift your profitable business to a successor, you’ll protect your business from tax penalties, as long as the business is worth less than $5.23 million over the total lifetime. However, if you pass away or become incapacitated before you set up a succession plan, you won’t be able to gift your business to a successor, and tax penalties will be incurred.

You can also form a partnership to transfer the business to somebody who can buy out the company upon your death, or if you were to become debilitated. Be sure this person actually wants to take over the business. Unfortunately, in some cases, the person chosen to buy out the company in such a partnership isn’t prepared to take over the company, doesn’t want it, or is unable to run it effectively, resulting in the business folding altogether. If you’ve chosen your children to take over the company, you will need to appoint a custodian who can take over the company until the children are ready.

AdvisorRETIRE™ can help you decide how to handle this aspect of the succession process. Contact us now to get started.

Get a Life Insurance Policy

In addition to your living will and your succession plan, a life insurance policy can ensure your family is taken care of in the event of your death. This is not only a way to ensure that the costs of living are covered, in addition to paying off personal debts, but it can help pay for college for your children, too. The proceeds of the life insurance can also be used for the spouse or children to buy out your share of the business if you have an S-corp or an LP, LLC, or LLP. You will want to ensure that the amount of life insurance coverage you buy will cover the costs your descendants need after you pass away. Work with your agent to determine the amount you need, and be sure to make adjustments throughout your life. Your life insurance needs will change depending on your personal wealth, the number of heirs, and other factors.

advisorRETIRE™ understands the ins and outs of succession planning, retirement, and planning for the future. Sign up with us today to discuss your situation and to get the ball rolling with your plans for the future.

Subscribe to receive our best succession planning content first.