While every Massachusetts resident over the age of 18 should have an estate plan, there is even more reason for entrepreneurs to outline what should happen to their business assets after their death. One notable example is Prince.
In April of 2018, Forbes reported that though two years had passed since the death of Prince, world-renowned American musician, his family had yet to receive a cent from his estate. This is despite the fact that he was worth an estimated $200 million at the time of his death. So, why the delay? The talented musician allegedly failed to plan his estate or write a will. This is an issue because in the absence of estate planning, property previously owned by the deceased goes through a complicated process before distribution. This may take several years to resolve.
While Prince serves as an important high-profile reminder of what happens in the absence of estate planning, he is not an anomaly. In fact, many entrepreneurs procrastinate on estate planning, year after year. In 2015, CNBC estimated that almost two-thirds of entrepreneurs did not have a succession plan in place. A succession plan details what happens to a business beyond the current owner, and may include sale or passing the business on to a family member. This is an important part of estate planning for business owners, especially if the assets of the business are shared with another party.
With numbers like these, it is not surprising that the report referenced by CNBC also found that only 8 percent of millionaire business owners became thus through inheritance. Meanwhile, three-quarters of millionaire business owners built their organizations on their own.
One of the key reasons often put forward for not having an estate plan is an unwillingness to think of death and the hereafter until one is sick and old. Yet, the same study found that baby boomers were not leading the way in estate planning; millennials were. Another interesting finding was that women were far more likely to have succession plans than men.
While estate planning and succession planning do not always go hand in hand, for the proactive business owner, the two are virtually inseparable. However, if creatives and traditional business owners continue to ignore the risks of passing without an estate plan in place, it is almost certain that more high-profile cases such as Prince will continue to find their way into the news.