The one certainty in life is death.
The experience will be traumatic, scary and confusing for those left behind. For that reason, estate planning is the last conversation that any person wants to have. It’s critical, however, for consumers to ensure that their personal and professional assets remain in good hands.
For business owners and solo-entrepreneurs, succession planning can be much more complicated.
In the event of a founder’s unexpected passing, the remaining team needs to carry on without interruptions.
Attorneys and financial advisors can help facilitate a smooth transition for business operations, proprietary documents and plans. But what happens to intangible assets, like a business owner’s data?
“Today, business succession planning is multifaceted, taking into account more than just who will take over a business or company,” says estate planning lawyer Gary Altman. “In response to our technologically advanced world, we now include planning for one’s digital estate.”
A digital estate, according to Altman, includes financial accounts, passwords, social media content and any other data being utilized by a business. Business owners need a clear plan for who receives access to information and how long a successor should have access.
“These details should be spelled out in advance,” says Altman.
More than spreadsheets
Altman points out that a succession plan can be as simple as a password-protected Word or Excel document on a secure computer.
“These systems could have all the business digital data and access to information that will be needed after the owner passes,” says Altman. “There are several companies offering various forms of data security and even companies that store passwords and provide access to those authorized.”
These documents should be prepared as part of a larger strategy and vision.
“The first step is to meet with an experienced estate and business planning attorney to discuss what the owner’s intentions are,” says Altman.
These professionals can provide direction toward the most effective tools and resources for accomplishing key intentions.
“The only way to ensure a smooth transition of data to successors is to have a legally documented plan, as well as to authorize someone else access to the full range of business data,” says Altman. “The plan will give clear authority to the chosen successor and explain what this person needs to do.”
Mark Snow and his team built SafelyFiled, an Internet-based company to assist individuals in the organization and storage of important documents, after dealing with the experience of settling their family members’ estates.
“My father had an insurance agency when he died, and though he was a very organized man, his method of organizing was not apparent until just about all the documents were found,” says Snow. “We realized that there had to be an easier way to deal with the masses of documents created by a business.”
With so many records in digital form, heirs may be unaware of assets and important files.
“We created SafelyFiled to help,” says Snow. “Secure cloud storage is ideal for this function. By not having the data on premises or on a desktop, it is protected from natural disasters like floods, tornadoes and fires.”
Snow says that a well-designed cloud service will provide protection from malware or cybertheft.
“It is critical that the cloud storage service also provide a way to make sure data is not changed,” says Snow. “If the data can be changed, there should be a complete audit trail.”
For instance, these records can be valuable in the event of an IRS audit or dispute with internal stakeholders. For accounting purposes, there should be strict limitations around deletion of files so that there is a traceable record of assets and liabilities.
Snow emphasizes that a succession plan should be designed with the future in mind.
“Assets like client lists or trade secrets need to be protected and secured, with reasonable assurances to the buyer that these assets have not been leaked,” says Snow.
The power tool that Snow recommends to maintain order? A checklist.
“The plan must be simple enough that it will actually be used,” he says.