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Sole Owners and Succession

Are you the sole owner of your company?  If so, do you have a succession plan in place for your business?  You do?  That’s great.  Does it pass muster with your bank?  If your brow is furrowed and a cartoon question mark is floating above your head, read on.

In the last year, we were contacted by two families who’d each lost a loved one who’d been the sole owner of a company.  One owner didn’t have a succession or estate plan at all, and the other had a trust.  Even with a trust, it took some time to appoint the successor trustee, all the while no one could sign company checks in order to pay the bills that continued to roll in.  The business whose owner didn’t have an estate plan went under because the probate process took so long and none of the family members were authorized to take over the bank accounts.

One might think a financial power of attorney would suffice for naming someone to come in after your death to access the bank accounts, in the absence of anything else.  One might think.  One would be wrong.  I was astonished to learn that most banks will not accept a power of attorney form.  I was even more surprised when I was told the only document that could accomplish the objective was an operating agreement or owner’s agreement, but that the bank wouldn’t provide any guidance on what the document needed to say.  I understand banks’ refusal to dispense legal advice, I really do.  But, in a case like this, if the owner takes a shot in the dark that the language in the agreement might pass muster with the bank, and the language fails, it’s too late because the owner has already passed to the Great Beyond.

All that said, this requirement is largely the function of a bank’s internal policies, so be sure to check with your banker to find out how you can properly appoint a successor in the event of your disability or death.

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