Succession Planning for Businesses and not for Profits

Pope Francis has taken over leadership of a powerful global organization. The Catholic Church has the advantage of a centuries old historical tradition for selecting the Pope’s successor. There is a readymade loyal staff of followers to help the new leader transition into the position, learn the demands, responsibilities and mechanics of his new role, and to provide support for the new leader to define and chart his own mission.

Does your business or not-for-profit have a succession plan? In times of crisis, having a procedure and path to move forward is critical to survival of the entity. The emotional demands are tolling; there must be a built in blueprint plan that can be followed in a mechanical way. In a real sense, people will be “going through the motions” while they process all that is happening and the impact it will have on them. Having a pre-established procedure to turn to will be a blessing; those making decisions will have a map to follow.

Some important questions to ask:

  1. Who will make interim decisions until a new leader is chosen or put in place?
  2. Is key information recorded and readily available for the new leadership to reference and use as the organization moves forward?
  3. Has the new leader been trained and groomed to take on the new leadership role? Does the successor know the organization’s core values and mission?
  4. Are the key people prepared to really accept, and support, the transition of leadership?
  5. Will the outgoing leadership be honored and respected for its accomplishments? Has their contribution been recognized and promoted?
  6. Is there a strategic plan to address challenges of the new leadership?

Studies reveal that more than half (55%) of CEOs who will retire before 2018 have not chosen their successor and almost half (47%) of family businesses have no plan to transition leadership if something happens to the company leader. Realistically, it can take years to train a leader. Many situations do not happen in a regular fashion. They need to be in a monitoring position for long enough to see how different situations are handled.

The result may be that a spouse who has not been actively involved in business operations is suddenly thrust into the role of primary decision-maker, a role s/he is ill prepared to take on, especially during the family and emotional crises brought on by death of a spouse and parent.

Why do family business leaders avoid creating a succession plan? Two reasons top the list: reluctance to let go and fear of the disapproval of those not selected as successor. The trait of a good leader is knowing when to leave. It is also being able to resist in the face of pressure and emotional overreaction of family members who are not selected as the successor.

Having “the talk” with your parents

People are living longer. While medical technology can keep our bodies mechanically working longer than ever, the later parts of life are often accompanied by dimensia, Alzheimer’s or other memory issues.

As health declines, there is a need for caregivers to understand their loved one’s health care wishes. The lack of clear instructions can lead to family fights, anxiety and feelings of guilt. Most of us dread this topic as much as we did “the talk” when we were teenagers. But, like that discussion, it is important to have this talk. (Hey, enjoy the opportunity to return the experience!) How can you start the conversation with your loved ones?

Next time you stop over to see Mom, bring up an article you read and start an unwanted but necessary discussion. You could also talk about someone you know who is facing a healthcare crisis in the family or a compelling case in the media. Ask questions to learn what Mom would want in similar circumstances. Does Mom fear that she will be given care and treatments she doesn’t want? Does she fear she won’t get enough care because no one is available to provide daily assistance or her insurance and financial resources are limited? Does she have explicit instructions or just general guidelines for her caregivers?

What is her tolerance for pain? If she had the choice between maximum pain relief that made her sleep or to tolerate some pain but stay awake and alert to visit with family and friends, which would she prefer? If she had a fatal car accident, and there was nothing the doctors could do, would she want to be taken off life support right away or kept on machines until out of town immediately family could visit and say good bye?

Exploring some issues faced by other family members friends or people in the media can reveal a lot about her needs and values, giving you the insight you’ll need to make decisions in the most challenging circumstances. After you have the discussion, encourage your Mother to memorialize her instructions in a health care proxy and living will so her loved ones can carry out her wishes. These documents are usually only a few hundred dollars and are preventative medicine against the thousands of dollars that are paid in legal proceedings when the documents are not in place and courts have to get involved.

Final wishes can come true

Gail Rubin, the doyenne of death, has a website that explores the rituals we use to celebrate and honor the lives of our loved ones. There are so many ways families approach the “final goodbye” with an opportunity to reflect, remember and celebrate. She promotes funeral pre-planning to alleviate much of the financial and emotional stress that accompanies the death of a loved one.

Estate planning complements this process. There is so much stress when a family crisis arises, so much emotion is brought out and often, family fighting. Children revert to their childhood roles and rivalries. It is human nature.

What can you do to prevent a difficult situation? The answer is simple. You can help alleviate family controversy by telling your family what you would want. They all want to your honor final wishes – the problem is that they often disagree about what you would have wanted. People read their own values into the situation. They also interpret what you have said in the past in different ways. Help them with a clear road map.

You can give your family peace in knowing that they carried out your final wishes. That is the best gift you can give them because they want to know you were happy. You give them a gift by identifying your wishes – a gift that is invaluable and irreplaceable. You give them peace – they don’t have to guess – they know for sure. We all want to give our best to our loved ones. So help them do that by telling them your wishes!

So many people believe their loved ones will know what they want, however, studies show that it is not so clear. Life is more complicated and situations are more complex than ever before. Should you be buried in a family plot with your parents? What if you were married twice. Which husband should you be buried with? If you are cremated, what should happen to the ashes? Should they be buried? Scattered? Kept in an urn? Who gets them? These can be difficult decisions, especially in the face of overwhelming grief. Your family wants you to be at peace in your final rest.

There are several legal documents that can help you do this – a living will, a health care proxy and an appointment of agent for disposition of remains. These documents generally are less than $500 to prepare. What is the price of family peace? If you have not prepared these documents, I encourage you to take the time. It will be a gift that lives forever.

How to say goodbye to a loved one

An article in the October 2012 issue of Oprah magazine about the book Final Gifts by Maggie Callanan was thought provoking in its humanity and wisdom. Maggie tells people to “meet the dying person where she is.” If she is in denial, then don’t try to change that. Talk about the future and reminisce about old memories. If she brings up the reality of her terminal condition and impending death, then acknowledge it. Don’t pretend everything will be okay- it won’t. The situation sucks, she hates it. It is okay to admit that. Being honest and direct is critical.

Everyone wants to know they mattered to someone. Tell her what she meant to you and how she will leave an enduring imprint. Talk about a life changing lesson or experience you had together or that she was responsible for bringing to you and your world.

Callanan emphasized how it is important to be in the moment and genuinely there – nowhere else. All that matters is what is happening in that room, at that moment, between the two of you. The outside world doesn’t matter. Be there in every sense of the word and experience every emotion with her as she travels her final journey in life. What is important is your presence, your relationship, and the humanity of a human touch. Let her know how you feel. Raw emotion is genuine. Everyone wants to be strong. It is also okay to cry sometimes. Cry together, love together, and accept the reality of life together. It can be a powerful experience for both of you.

Health Care Proxies: preparing as best you can

There are not many things that can be controlled in life. As much planning as you may try to do, each day is full of surprises. While we only hope for good surprises in life, there are moments that are not so great. If you were in an accident tomorrow and were rendered incapable of expressing what treatments you do/do not agree to, what would you do? In New York, medical professionals usually go by the rule that unless otherwise directed, they are to keep you alive by any means possible.

While this seems like a good mantra, many patients have specific health guidelines they prefer their medical professionals to follow. For example, many religions do now allow blood-transfusions, even if it means the difference between life and death. Others prefer to die naturally rather than being kept alive artificially only to prolong the inevitable death from the illness/injury.

In these cases, without the patient’s ability to communicate these wishes (as is the case with patients who are either unconscious or rendered incompetent) the medical professionals are left to make these very personal decisions for the patient.

Health Care proxies allow individuals to appoint an agent to whom medical professionals consult with when medical treatment decisions need to be made. In New York, a standard Health Care Proxy (HCP) form can be prepared and given to all health care professionals (rather than completing a different form at every doctor’s office and hospital). The HCP form outlines the medical preferences of the individual (i.e. being kept on life support), as well as allows the individual to choose one or more persons that medical professionals must refer to when the individual is unable to express his or her medical preferences/needs.

It is important to notify any person you have appointed as an HCP agent to make sure that he or she understands your wishes and what you would and would not agree to medically. The person you appoint as your agent should be somebody you trust and who knows you well enough to make these difficult decisions on your behalf, should the situation come up. While every effort should be made to make sure any specific wishes you may have regarding any medical treatment are covered in the HCP, there may arise a situation that was not included in the HCP. In cases like these, it is important that the agent being consulted knows and understands you well enough to make decisions about these unforeseen circumstances.

Disposing of real property outside New York

Real property must be disposed of by the laws of the state where it is located. Thus, if a person dies in New York, but also owns property in another state, there will need to be probate proceedings commenced in both places. The “main” probate will be where the deceased resided at the time of death and “ancillary proceedings” will be in other states where real property is located. With court filing fees and other expenses, it can be costly to start probate proceedings in multiple courts.

One technique that can be used to allow the transfer of the property without probate is the use of joint ownership of the property. With joint ownership (not tenants in common), ownership passes upon death. Joint ownership provides for rights of survivorship. Thus, by operation of law, the death of one owner vests full title in the remaining owner(s) without any further action or proceeding. This can be a powerful tool to expedite disposition of real property at death and minimize probate costs and delays. The cost of a deed transfer is almost always a fraction of the cost of probate administration for the property. However, this must be carefully considered, and planned, as there may be issues of loss of ownership control, creditor’s rights, or tax consequences of such transfers. An experienced attorney can help evaluate your individual circumstances and implement the plan that best fits your needs.  

Special considerations for your Living Will and Health Care Proxy

New York is one of two states that do not recognize the authority of family members to make decisions for incapacitated adults. The only way to ensure that your medical preferences are enforced when you are unable to express them yourself is by appointing an agent – your health care proxy – to inform doctors and other health care providers of your wishes.

In New York State, health care providers are not permitted to withhold life-sustaining treatment unless there is clear and convincing evidence (outlined in your living will) that you prefer otherwise. Without a health care proxy, your doctor may be required to provide you with medical treatment that you would have refused if you were able to do so. For example, if you were in a coma or vegetative state with no hope of recovery, or if you were terminally ill, the doctor may still be required to provide “heroic” measures to sustain your life, such as with respirators, feeding tubes and other treatments. A health care proxy lets YOU make your own medical decisions, rather than to leave them to doctors, lawyers and health care professionals who likely don’t know you and your wishes. Your living will provides clear guidelines of the medical decisions you would make were you able to do so.

If you become too sick to make health care decisions, someone else must decide for you. When a patient is too sick to speak or express his own desires about medical treatment, the family and doctors may be in the difficult position of guessing – and even disagreeing about – what treatment the sick person would have wanted. Feelings about these issues involve deeply held spiritual, medical and often religious, beliefs. Many times family members cannot agree and the decision can tear apart a family. At a time of tragedy and crisis, families need to support one another, not feud over emotional and painful decisions. Combining a living will with a health-care proxy is the best way to present “clear and convincing evidence” about the patient’s decisions.

The New York Health Care Proxy Law allows you to appoint someone you trust – for example, a family member or close friend – to decide about treatment if you lose the ability to decide for yourself. You can do this by using a Health Care Proxy to appoint your “health care agent.” Unlike a power of attorney for financial matters, only one can be acting at a time (no co-agents acting together) but you can have alternates. A living will is a document that provides specific instructions about health care treatment. The health care proxy does not give you agent the power to make non-health care decisions for you (ex. financial decisions).

You can give the person you select as little or as much authority as you want. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then make sure that health care professionals follow your wishes and can decide how your wishes apply as your medical condition changes. Hospitals, doctors and other health care providers must follow your agent’s decisions as if they were your own.

Because artificial hydration and nutrition decisions cannot be made by your agent unless he/she has specific knowledge of your wishes, a living will helps establish the necessary “clear and convincing evidence” necessary to withhold these life sustaining treatments. Your views on this subject can be expressed orally and still be effective, however, it is certainly much better to put them in writing. You may wish to talk first with your doctor, religious advisor, family or other people before giving instructions to your agent.

Common misconceptions about spousal inheritance

One thing I am passionate about is dispelling common misconceptions about estate planning. I believe it is really important to have your affairs in order so that when you pass, your loved ones are taken care of and they do not have to be overburdened with making arrangements during the emotional turmoil of mourning your passing.

It always surprises me how many people have not taken the time to properly plan their estate, mostly because they incorrectly assume that when they die, everything goes to the spouse. This is actually not the case. If you die without a will (called ‘intestate’), a portion of your estate goes to your spouse and a portion goes to your children. For example, if the house where you and your family live is in your name and you pass away (and you do not have a will in place), by default the house will become jointly owned by your wife and children as tenant in common (no rights of survivorship).

While this sounds okay to a lot of people, it may render the spouse incapable of accessing the assets needed to take care of the family, for example, getting a home equity loan or selling the home or business when someone passes. There will be issues as to which things are part of the estate and which things are owned jointly with rights of survivorship (passing outside the terms of the will or intestate estate) – joint bank accounts and houses owned jointly by a husband and wife are common examples. The spouse cannot be disinherited, so there is a right that can be asserted by the surviving spouse to take a minimum portion of the estate before anything goes to children or others.

Setting up your estate is crucial if you want to ensure that your family is able to make use of the property that you pass down to them. Your attorney can help you prepare the right documents to accomplish your goals.

Estate Planning: Living Will & Health Care Proxy

It is important to consider what kinds of medical treatment you would want or not want if you should become unable to make health care decisions for yourself. Combining a living will with a health care proxy is the best way to present “clear and convincing evidence” about your decisions.

A living will is a document that provides specific instructions about health care treatment. In a living will, you declare your wishes to accept or refuse life-sustaining treatment under certain circumstances. The living will often expresses general principles, such as the preference that treatment should be withheld if it would artificially prolong life. Other living wills list the specific kinds of treatment that are or are not acceptable, such as renal dialysis, chemotherapy, “do not resuscitate” orders or artificial nutrition and hydration (tube feeding).

Issues you should cover:

  • artificial hydration and nutrition
  • cardiac resuscitation and DNR orders
  • mechanical respiration
  • antibiotics
  • pain medication
  • AVOID ambiguous terms like “heroic measures” or “extraordinary treatments”

The health care proxy allows you to choose someone you trust to make medical treatment decisions on your behalf. With a health care proxy, your health care agent can interpret your wishes as medical circumstances change and can make decisions you could not have known would have to be made. You should limit the instructions you provide in the health care proxy itself – detailed instructions might unintentionally limit your agent’s ability to act in your best interest.

You can revoke your proxy or appoint a different one at any time by destroying the document and/or executing new one. You should notify your agent, doctor, lawyer, family and anyone else you gave a copy orally and in writing of your change or revocation.

Things to consider when choosing a health care agent:

Is your potential agent

  • able to separate his/her own feelings form your own, respect your wishes even if they are different from what they used to be or if he/she thinks they are unusual or foolish?
  • close by and willing/able to come now and in the future?
  • willing to talk about your sensitive wishes and impending death; stay with you even when the going gets rough; allow you to talk about unfinished business, ask for forgiveness, offer apologies, share fears and sorrows?
  • willing and able to work with health care providers?
  • willing and able to handle potential conflict between family and friends?
  • able to care for him/herself so that he/she is not drained by your illness?
  • willing and able to handle responsibility, seek out information about your illness and what to expect?
  • willing to acquaint him/herself with the social norms of your culture and religion?

Although the living will and health care proxy are separate legal documents and you do not need both documents, it is recommended that you consider completing both. Each document serves a specific purpose that together help provide clear and convincing evidence for a designated individual to carry out your preferred medical decisions.

Keep in mind that your health care proxy does not need to be the same person as the person to whom you give power of attorney or name the executor of your will. You can choose separate agents for each function. In fact, it is common that one person is appointed to take care of legal and financial affairs while a different person is appointed for health care decisions. You should consider the circumstances (financial, time, emotional and geographic) and their ability to carry out your wishes.

Common terms:

  • The health care agent is the person you elect to make decisions about medical treatment when you are not able to do so.
  • Advance health care directives and durable powers of attorney for health care are other common terms that refer to living wills and health care proxies.

Objectives/Goals of the Living Will and Health Care Proxy:

  • Identify and document your health care directives so your loved ones can carry out your wishes.
  • Prevent your family from the often overwhelming burden of medical bills for treatments you do not want.
  • Enable your family to make arrangements for medical treatment you may need (ex. home care, physical therapy, dialysis, HIPPA authorization).
  • Enable your family to communication with insurance companies (HIPPA authorization).
  • Identify who you would like to bear the responsibility of communicating your wishes or making medical decisions if you can no longer do so.
  • Document clearly your wishes concerning artificial nutrition/hydration, mechanical respiration and organ donation.

Estate Planning: Power of Attorney

In a Power of Attorney, you select one or more people (called an ‘agent’). The agent is given the right to sign documents and transact business on your behalf during your lifetime. If you select more than one agent, you can specify if each agent can act individually, or if the agents must agree and act together. You can also select alternate agents. If you want to grant authority to your agent(s) to make gifts of over $500 per year to any done (often part of Medicaid planning or to help immediate family members in emergency situations), you must also sign a statutory gift rider.

The Power of Attorney is a powerful document and should only be given to people whom you would trust to do business and day-to-day transactions on your behalf as if it were you.

The Power of Attorney is valid as soon as the document is signed until your death unless you state an event or date for its termination. You have the option to revoke the power at any time. There are a special set of procedures that must be followed to properly revoke this power.

Common terms:

  • The grantor is the person who is giving power of attorney to someone else.
  • An agent is a person who will receive the power of attorney to act on your behalf. Sometimes the agent is called the ‘attorney in fact.’

Objectives/Goals of the Power of Attorney:

  • Assures that there is no family dispute as to who should handle your affairs.
  • Enable the agent to act on your behalf should you become disabled or otherwise unable to perform in that function.
  • Allow a family member or trusted individual to assist with the day-to-day affairs on an as-needed basis.
  • Enable the agent to make tax-free gifts (up to the federal annual exclusion), which allows for Medicaid planning.
  • Permit agent to make unlimited tax-free gifts for medical and tuition expenses for each intended donee.
  • Empower the agent to act for you in tax and financial matters, including paying health expenses without being responsible for the debt and to change your domicile (permanent residence).
  • Permit agent to transfer assets to your revocable trust for asset protection.