No one wants to talk about death. I totally get it. But as Benjamin Franklin famously said "In this world nothing can be said to be certain, except death and taxes."
So for business owners, including online business owners, it is important to do some planning to protect the value of the business. Some planning in advance will also save your grieving family members from additional expenses, hassle and paperwork.
One of the inspirations for writing this article originally was a CBC article featuring my friend Dianne Taylor. Dianne's grief was compounded when her spouse Tim died suddenly and had not been aware that his RRSP designation was still in favour of his mother, not his spouse. The laws of Nova Scotia did not help her recover their retirement savings.
If you think that you don't need to worry about your estate planning because you will be dead, think about your family. They will be the ones left to deal with the consequences.
So onto my top five estate planning tips for Canadian Online Business owners:
I have often said that the most important decision you make when you draft a will is to name an Executor (and alternate Executor). It is important as a business owner that your Executor has the knowledge, skill, and judgment to deal with business assets, as well as your personal assets and family situation.
The Executor has a big job - they have three main duties :
(1) To determine what your assets are and secure them (think changing locks, getting insurance, accessing accounts;
(2) To pay your debts (including filing and paying income taxes); and
(3) ONLY THEN to distribute and pay any remaining assets to the beneficiaries in accordance with the will. The beneficiaries only get any payments or property after the debts are paid.
Picking the right executor and giving them access to the proper information about your business assets, business advisors and accounts will help them do their job.
Insurance policies and registered plans are important to consider when you do your estate planning. When you make a beneficiary designation on a form or in your will, you are indicating that the proceeds will go directly to the named beneficiaries, and not be part of the assets dealt with by the terms of your will.
Make sure to get a confirmation in writing of who your beneficiaries are. They may not appear on your statements. And having the wrong beneficiary named, can have horrible consequences for your family.
What would happen to the operation of your business if you were temporarily or permanently disabled or incapacitated? Who would pay the bills and be able to access important information?
A property power of attorney can help to facilitate the process of giving someone else the power to deal with your business assets if you were not able to do this for a short or a long period of time. Do you have one?
Succession planning for your business on your death does not have to be fancy or elaborate.
Do you have a co-owner? If so, your shareholder or partnership agreement should consider what would happen if one owner dies.
Is there an employee, supplier or even a competitor who may want to buy your business? Document this information and provide whatever assistance you can to your executor.
If you do any planning with your accountant, financial advisor, or lawyer, make sure your executor has their contact information and knows to reach out to them.
Your Executor can hire professionals as necessary and these expenses will come from the assets of your Estate. At the end of the day, however, your Executor needs to make the final decisions once advice has been provided.
People usually think first about their bank accounts and household effects when they start will planning. We are all accumulating more digital assets, especially online business owners - including course It may not seem as obvious to an online business owner that they should leave details of their digital assets for their Executor.
Your business likely has created social media accounts, copyrighted content, online courses and memberships, and client lists. These are all important business assets that could be sold or otherwise disposed of on your death.
Think about how you can provide passwords and access to your Executor for your intangible assets as they will form part of your estate, just like your china and your piano.
Using a password manager program (like my favourite Lastpass) can help you to facilitate password sharing in a secure manager.
So far we have mostly been talking about what happens if you die, but it is also a risk for your business if you become temporarily or permanently incapacitated.
Personal directives give someone else the power to make personal care (non-financial) decisions on your behalf if you become incapacitated.
Powers of attorney (property) can give someone else power to deal with your financial assets, including your business assets, if you are incapacitated. This can be useful to be able to make financial decisions and access bank accounts, tax accounts, etc.
You can have the same person (or a different person) named to have property power of attorney over your business assets. Think about what makes the most sense in your particular circumstances.
It is not fun to think about death or disability, but doing so can help protect your business and your family in the event the unexpected happens.
Choosing an appropriate Executor (and Alternate Executor) in your Will and having regular communications with them will help everyone to be well prepared.
*This article was originally published on May 14, 2021 and updated and revised in March 2022.