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What if you die?

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What if you die?

Dan’s last three days were like a bad dream. His best friend and fellow tire dealer, John, was killed instantly in a horrible auto accident.

Dan spent the 72 hours following the tragedy consoling the widow, comforting the kids, and trying to determine what assets John had, where they were, and what to do about the business, its employees and customers.

Every business owner owes it to his or her family, employees and customers to create a plan for this “what if” scenario. If John had been adequately prepared, he would have provided written guidance. Without it, his spouse, children, employees and professional advisors had no clue as to where to locate financial assets or how to access them.

When someone dies unexpectedly, there are immediate demands for cash for the funeral and day-to-day bills. Business owners and their professional advisors need to work as a team to develop a “What if?” plan, which would allow everyone involved to know exactly what to do and how to proceed.

Unfortunately, most people tend to have a mind-set of invincibility, and refuse to take the time to prepare their loved ones for their death.


A business left hanging

From what Dan could ascertain, John had no life insurance, and no written plans for handling the business in case of his demise. He had all kinds of equipment leases, business loans and vehicles that he had personally guaranteed.

When he passed away, these debts became immediately payable, and the creditors were serious about collecting. Other than the business, John’s biggest asset was his home, followed by some modest retirement and college savings accounts. How was John’s widow going to pay for the funeral, let alone come up with cash for the creditors?

During the next two weeks, things went from bad to worse. Since John was a hands-on entrepreneur, his customers had already started to leave.

Shortly after the funeral, John’s general manager contacted Dan. He told him that, in order to protect his family, he was accepting a position with another company. Things continued to spiral, until in a matter of weeks, the only remnant of John’s business was the inventory and equipment. In order to turn those assets into cash, they would need to be auctioned off to the highest bidder.

Unfortunately, this scenario is more the rule than the exception. Many a home could have been saved, a college education funded, and a widow able to financially take care of the household and children if the entrepreneur had, at some point, addressed the simple question: “What if?”

Wake-up call

Dan knew that the time had come to stop procrastinating. A business advisor had approached him several times during the last 10 years about creating a “What if?” plan.

He told him how important this preparation was, but Dan thought the guy was trying to sell him life insurance or some other financial product in which he wasn’t interested. Now, after losing his best friend, reality slapped him hard in the face, and he knew it was time to do the right thing to take care of his family.

To create a “What if?” plan, Dan’s advisor gave him a series of exercises. First, they discussed what would happen to the business if Dan died. They reviewed:

* which professional advisors should be contacted immediately;

* which employees would be critical to retain in order to keep the business’ value intact for six months;

* what additional duties each of these employees would be responsible for;

* what type of bonus the employees should receive for staying on through this critical period;


* who would be a good potential buyer after the smoke cleared;

* how the business should be priced and how the deal should be structured to protect his family.

Next, they looked at what would happen financially to Dan’s family if he died tomorrow. They reviewed:

* all loans and other obligations that Dan personally guaranteed for the business;

* how much income his family needed to live on each year;

* where he stood regarding college funding for his children;

* the amount of personal debt (including mortgage, credit card debt and car loans) that he had outstanding;

* the amount of cash flow that would be needed to keep the company going for six to 12 months and support the family over the same time period; and

* his insurance coverage.

Creating an action plan

When Dan completed the exercises, he asked his attorney, accountant, financial planner and business advisor to meet as a team. He reviewed the results from the exercises, and asked them to work together to develop a written plan to ensure that his wishes would be carried out if something unexpected should happen to him.

He also purchased an inexpensive term life insurance policy to cover every dime of such a financial impact in case he died.

Fortunately, Dan hasn’t had to enact his “What if?” plan. And he sleeps soundly knowing that his family is covered if anything ever happens to him.

Thomas Houck is a CPA and CFP (Certified Financial Planner) who has spent the majority of his working life dealing with small- to mid-size business owners.

?Houck’s program, “Your CFO Advantage,” has helped numerous business owners grow their businesses, reduce their taxes and lower their stress levels. He specializes in listening to business owners’ problems and concerns, then helping them develop strategies to systematically address each issue.

For more information, visit his Web site at

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