The value of preparing for the worst

Feb 23 2010 by Neil Warwick, The Journal

MOST people do not like visiting a lawyer. In fact most people would rather go to the dentist than see their lawyer. The law tends to be a distressed purchase.

You see your lawyer when you need to sue someone, if you are getting divorced or if you need to enforce your statutory rights.

However, one area that often gets neglected, but should be stressed by lawyers to their clients, is the importance of being proactive and planning for the future in order to save money.

One such area is succession planning, which involves aspects such as the drafting of wills and making provision for dependents should the worst happen. When asked about this recently one client responded by saying “I do not intend to die”.

Without wishing to sound too morbid there are worse things than dying unprepared - such as living unprepared. When illustrating points about succession planning, lawyers nearly always use exotic examples of entire families being involved in an horrendous plane crash, perhaps near a volcano. However, reality can be more mundane and in many ways more tragic.

A recent case illustrates how living unprepared can be difficult for you, your family, your business partners and your staff. A businessman in his late 40s had a stroke at the wheel of his new car. He owns 50% of a business which he set up with one of his school friends nearly 20 years ago. He has two teenage children, one preparing to go to university next year and the other sitting GCSEs in the summer. Both are currently at fee paying schools.

Unfortunately, at present the businessman is paralysed and cannot communicate effectively. He will require permanent hospital care for the foreseeable future, including specialist care which may cost a lot of money. As with many other owners of businesses, the previous 20 years were focused on building a successful business and succession planning was not on top of the list of priorities.

As a result, the businessman has no insurances, powers of attorney or contingency plans in place so his business partner is having to run the business and look after the 70 employees himself. His business partner is currently paying the usual monthly wage to his partner’s wife. However, if things go on for too long, he is not sure he will be able to continue making the payments. Of course, this could have a huge impact on his colleagues’ private arrangements. Equally the constitution of the business had never been tailored to allow for this eventuality. If his colleague is declared to be permanently incapacitated, the shares in the business will automatically transfer to his colleague’s wife.

:: For more information about succession planning and protecting your business, contact Neil Warwick, partner at Dickinson Dees on 0191 279 9375.