Protect Yourself as a Business Owner
When a family’s personal finances are intertwined with those of a business interest, the pain and disruption form the loss of a loved one can be especially trying. Herewith, some hard-earned suggestions:
- Your Will – If you don’t have one, get one, If you do have one, revisit who you have chosen as your executor. If you’ve designated your spouse, discuss whether it’s realistic to think he or she will be able to take on such a big responsibility immediately after your death. If you still choose your spouse and he or she isn’t familiar with the business, consider appointing a coexecutor who is.
- Life Insurance – Resist your natural instinct to save money and purchase an adequate life insurance policy. What’s adequate? Financial planners have their own calculations; however, it should be at least enough to cover five years of major expenses (mortgage, tuition, car payments, etc.) for those who are dependent on your income whether they are a spouse, a child, or a parent.
- Disability Insurance – It’s relatively cheap and can really come in handy. But be aware that if you declare yourself fully disabled, you may be forced off your company’s health insurance plan. You might end up having to purchase a more expensive individual health policy that could reduce or erase the value of the disability payment.
- Retirement Savings – Don’t assume that your equity in your business is a virtual pension plan. Your company may end up having little or no value when you retire, get sick, or die. Be disciplined about setting aside savings every year, and be sure to diversify your investments.
- Lawsuits – Everybody has them. Give your executor a list of the cases, the attorneys you are using, and their contact information. Update the list regularly.
- Financial Accounts – Don’t make your executor go in search. Keep an updated list of your major assets and liabilities and where they’re located, so he or she has somewhere to start.
- Bank Accounts – Make sure your executor knows which bank(s) you’re using and what the account numbers are.
- Passwords – In an age where your most current and important information is likely to be found in a password-protected area of your computer, your executor needs to be able to gain access. Forget the safe-deposit-box key; give the executor a list of your computer, email, and voice mail passwords. And importantly update the list regularly.
