Each year, companies and individuals participate in a mad scramble to submit their returns by April 15. When tax preparation season is not in full swing, accountants nonetheless keep tabs on expenses and tax laws to be as prepared as possible when it’s that time of year again.
But how many people take the same care in preparing for the other guaranteed life event: death? It’s not a topic most are comfortable talking about, and it certainly does not lend itself to the same jesting and trash talking taxes and the IRS so often receive.
Joseph F. Augustine, owner of Wyncote, Pa.-based JFA Architecture P.C., asserts it is never too early to implement a plan of what to do with your business in case of death. “I think you have to keep a realistic perspective about the reality of life,” he says. “You never know — jobsite injury, roadside injury, health problems or even if you become permanently disabled. It’s especially risky in the construction industry.”
Augustine says developing a plan, or checklist, in case of death, should be part of any business plan ... “especially when you’re a sole proprietor, there are a multitude of people who rely on you and everything is in your hands and under your control.”
Augustine, who is the sole proprietor for JFA Architecture and a partner in a second business, relies on a checklist. “It’s not something I pull out every day, but it is readily available,” he says. The list includes all who are involved in the business and a list of what survivors should do and whom they should notify. Augustine also recommends including a list of banks, account numbers, phone numbers, contact names, etc. “It’s not only a checklist; it’s everything consolidated into one document.”
For example, notifying insurance companies should be an early task. “If a family was insured through the business, that’s something that would have to change because the business would no longer be providing health insurance,” Augustine says. It’s also important to contact accountants, banks, trade organizations and associations, and active jobs. Augustine has a reciprocal agreement with other companies that will help each other in case of death or injury.
Deciding what happens to the business is a crucial decision. “Will it be sold or closed?” questions Augustine. “Those are decisions that need to be made.”
Some business owners develop an agreement about what happens to their business in case of the death of one of the partners. “I’m not a legal expert, but my understanding is that by default, the heir of the deceased partner would inherit it, and they would have first rights of refusal to either sell, remain active or appoint somebody else,” Augustine says. Some business owners also take out life insurance policies on the other partner to cover financial expenses in case of death.
“Let people know that list exists,” Augustine recommends. He sent copies of his checklist to his accountant and insurance agent. Someone close to the deceased may not remember where the list is and might not know what to do with it under the stress of a death. “It’s really nice to have the insurance agent and accountant have it and know what to do with it almost automatically,” he says. “They almost become like the executor.” Sending professionals an in-case-of-death list also allows them to review the document and suggest any additions from their professional perspective.