Planning lets your business and your family survive illness, accident and death. Learn how powers of attorney, a buy-sell agreement, a representation agreement and a will work together for BC business owners.
How do you protect your business and your family if you become ill, are injured or die in British Columbia?
I have practised law in British Columbia since 1991, and business owners often tell me they have planned everything except what happens if they cannot work. Planning is how you work smarter rather than harder. Besides providing a good life for yourself and your family, both before and after death, you probably want the satisfaction of leaving a successful business that outlives you.
There are three types of planning you can do so your achievements survive you: planning for the short term, planning for the longer term before death, and planning for after death.
1. Short-term planning: when you are not working at 100%
Make a plan for the events in life when you cannot give your business your full attention. That could be a minor or serious accident, or simply a well-deserved long vacation after your success.
- Insurance: talk to an experienced broker.
- Cash flow for financial emergencies: talk to your banker and your CPA.
- A Power of Attorney (POA) for your business: identify who you trust to run your business if you cannot, and give them a POA with the specific authority to make all the business decisions that will be needed.
- A Power of Attorney for your family responsibilities: give your spouse or another trusted person the authority to make family financial decisions for you, even something as simple as renewing the car insurance if you are the only owner.
A person appointed under a POA has fiduciary duties and responsibilities, much like an Executor. Help them help you by putting details in your POA about what you want done, when, how and why. That avoids disappointment later.
2. Longer-term planning: before death
Some events, such as a serious accident or a coma, may mean you are unlikely to return to your business. In addition to a POA for financial decisions, you should have a document such as a Buy-Sell Agreement with your business partners. It sets out who can buy or sell the business, and how.
Medical decisions also need attention, not just financial ones. A Representation Agreement sets out how you want medical and related financial decisions made for you. It can include your wishes about the quality of your care if you no longer have the capacity to make decisions but are otherwise physically healthy, for example after a brain injury. It can also say how long you wish to be kept alive mechanically if there is no hope of recovery.
If you have no disability or long-term care insurance, you are in effect asking your family and business partners to spend your money on your care. That can quickly use up any inheritance you hoped to leave your survivors. Talk to an experienced broker.
3. After death: your Last Will & Testament
The primary estate planning document is your Last Will & Testament (your "Will"). Your Will has no effect until your death, and your POA and Representation Agreement end when you die. In your Will you can name who will manage and then sell your business, and who will administer your estate before it is distributed to your named beneficiaries.
Two reminders that apply to every document
- Name both a primary and an alternate: name an alternate appointee in every document, because life events happen to them too.
- Review every six months: confirm that nothing has changed, such as a different business, a different spouse or a different beneficiary.
Putting the pieces together
- Short term: Power of Attorney for business and for family, so trusted people can make decisions if you cannot.
- Longer term, before death: Buy-Sell Agreement with your partners, and a Representation Agreement for medical and related financial decisions.
- After death: Will naming who manages and sells the business and who administers your estate.
Next steps
Talk to your broker about insurance, and to your banker and CPA about cash flow. A lawyer can help you prepare the legal documents so they work together. This article gives general information only, not legal advice and not tax advice. All meetings are by appointment only, by phone or secure video, so please book ahead.
Without a Power of Attorney, nobody may have clear authority to make business decisions for you. A POA for your business names a person you trust and gives them the specific authority they need. A separate POA for family finances covers your personal affairs.
No. Both end on death. Your Will is the document that takes effect at death. It names who manages and sells your business and who administers your estate before it is distributed to your beneficiaries.
A Buy-Sell Agreement is made with your business partners. It sets out who can buy or sell the business and how, if one owner can no longer take part because of illness, injury or death.
Review all of them every six months to confirm nothing has changed, such as a different business, spouse or beneficiary. Always name an alternate for every appointment, because life events happen to the people you choose too.