I remember being younger than I am now, when the turn of the year would see me making some grand plans for the future. Often those plans worked out as I hoped, and in most cases I think did help to provide focus. And then I discovered that there are events in life which blow best laid plans out of the water. We will all experience them in one way or other, perhaps if people let you down, or even more scary, when you realise that health is not something you should take for granted.
Too often people view their lawyers as people who only help when something goes wrong, but I don't believe that is true. I believe that lawyers can work with their clients in order to help them achieve more during the good times, and to protect them during a crisis.
Let me explain by looking at an example:
Donald and Hilary are in their early 60s. They had 3 adult children, each of whom had their own children, however one of their sons very sadly predeceased them. Hilary's parents are still alive, but are starting to become a little forgetful. Donald and Hilary would like to retire, but they aren't sure they can afford to. They are both the Directors and only shareholders in a company which manufactures shoes. They are busy people and haven't consulted their lawyer for any personal matters since they bought their house, and that was 30 years ago. They don't have Wills.
The worst scenario would be if one of them were to die without a Will. You will not receive your spouse's estate just because you are married. The amount is restricted by statute, and in Donald and Hilary's case, it is likely that their children will be entitled to receive a significant part of the estate. The children of their son who has died will also be included and as there is no Will, the court will likely have to intervene to look after their share until they are 16, at which point they will become entitled to ask for it. It may be that the future running of the company is impacted. Finally, the inheritance tax position might be a problem.
If they had consulted a lawyer, they would have been recommended Wills to ensure that the spouse is protected; there would have been a Trust provision to protect the grandchildren; the business assets would have been protected; and inheritance tax could have been minimised or indeed avoided altogether.
If one of Hilary's parents loses capacity, i.e. they can't make decisions for themselves on welfare or financial matters, then they will run into problems if they don't have a Power of Attorney in place. Assets can be frozen and care arrangements difficult to make, unless and until a Guardianship order can be obtained. This is a court application and can be costly and time consuming. They should make a Power of Attorney now, while they still can.
The ability to retire will depend on financial strength, and for many business owners this will depend on what exit strategy is envisaged for the company. It might be retained and run by a management team, with Donald and Hilary receiving dividends which fund their retirement. They might need to sell the company. Challenges can arise in family businesses when one child is involved in the business and would like to take over in due course. The parents often want this to happen, but then worry about how they ensure all children are treated equally.
When you are thinking about retirement, it is safe to assume that the earlier you take advice, the more options you will have. You will be more in control.
At Morton Fraser we have created a client focused approach called Designed for Life, which we use to show clients the benefits of planning. Then, if something goes wrong, it shows how to make the most of a difficult situation.
Designed for Life is about making the most of life, whatever it throws at you. It is always relevant, but it feels particularly so at this time of year. Might your new year's resolutions involve making a plan which is Designed for your Life?