Vital to have good succession plan in COVID WorldPosted on March 30, 2021 in Relationship Property , Trusts , Private Client , Property (Tags:)
It is one year since New Zealand went into the first Level 4 lockdown in response to the COVID-19 pandemic. In the space of a year life in New Zealand has dramatically changed especially for business owners who are experiencing the ongoing effects of our closed borders and changing COVID-19 alert levels. While we look forward in hope to the vaccine rollout and some travel bubbles being opened, we know that a return to “business as usual” in many sectors is still a long way off.
In the last 12 months, many business owners have had to adapt and change the way they operate while continuing to focus on strategic planning and business continuity.
Personal estate and succession planning is an important part of any business continuity plan. While this may not seem like a priority in the face of the many stresses and demands that business owners have faced in the last year, an out-of-date estate plan could cause even more heartache and stress in the event of an unexpected death or an accident that causes permanent incapacity.
Business owners need to be prepared for the death or disability of any key person in their business by ensuring that each key person has at least an up-to-date will and enduring powers of attorney in place.
A will appoints executors (also known as trustees) who, in the event of the will maker’s death, will administer the estate and distribute the deceased person’s assets. The executors also become the personal representatives of the deceased person. If a person who is in business as a sole trader dies unexpectedly, the executors may need to take an active role in the business to either keep it operating or wind it up. Business owners, particularly sole traders should carefully consider who to appoint as executors and trustees and may want to consider appointing a business advisor as a professional trustee.
An enduring power of attorney for property appoints a person or people to represent the donor (the person creating the enduring power of attorney) and make decisions regarding his, her or their property and money if the donor or loses mental capacity. An attorney for property can also sign legal documents and enter into contracts on behalf of the donor. For sole traders it is very important to appoint an attorney for property who understands the business and will be able to step in and ensure business continuity if the business owner unexpectedly becomes incapacitated (for example because of a sudden stroke or accident).
Business owners who trade through a company or a partnership should review their personal succession plan in light of any shareholder agreement or partnership agreement that they are a party to. Many of these agreements include clauses that allow executors or attorneys to represent the parties to the agreement so it is important that business owners appoint executors and attorneys who will be able to work with their business partners.
As New Zealand moves into its second year of business in a COVID-19 world, it is more important than ever for business owners to look to the future and ensure that they have good succession plans in place.