Episode 347

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What happens to our agencies when something happens to us? No one likes to think about the day that they’re no longer around, and it’s no secret as to why. The conversation can feel more than a little uncomfortable. But as agency owners, it’s one that’s far too important for us to avoid or ignore. If we want to ensure that our businesses —and more importantly —our people will be taken care of should the unexpected happen, then we need to make sure that we have a plan in place that allows our agencies to keep living on even after we’re gone.

On this episode of Build a Better Agency, I sit down with attorney Andrea Shoup to start the conversation and hopefully, to help you all do the same. Andrea holds a depth of expertise in both estate planning and business law — making her the perfect person to help us wrap our heads around this tricky but critical subject.

During our conversation, Andrea offers up her invaluable insights into navigating different succession plan options, learning how, when, and with whom those plans need to be created and communicated, and what happens when we don’t have a contingency plan in place.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.
legacy planning

What You Will Learn in This Episode:

  • How legacy planning can protect your business —and your people— should something happen to you
  • The key differences between a will and an estate plan
  • Everything that goes into a contingency plan — and how to get yours started
  • Who needs to be involved in your contingency planning, and how those plans should be communicated
  • How long it will take you to gather the information you’ll need for your plans
  • What happens when we DON’T have a contingency plan in place
  • When is the “right time” to start planning your agency’s succession?
“I think the biggest thing is understanding what happens to our business when something happens to us.” @AndreaShoup Click To Tweet “As business owners, it is up to us. We can’t leave it to chance. We can’t leave it to the state to make decisions for us.” @AndreaShoup Click To Tweet “As an executor, you don’t have control. You don’t have decision-making power at that point. It’s gone.” @AndreaShoup Click To Tweet “Who steps in? Who’s responsible for making sure that payroll happens? Who has access to the business bank accounts?” @AndreaShoup Click To Tweet “You need a trust whenever you own any real property.” @AndreaShoup Click To Tweet

Ways to contact Andrea Shoup:

Speaker 1:

If you’re going to take the risk of running an agency, shouldn’t you get the benefits, too? Welcome to Agency Management Institute’s Build A Better Agency podcast, presented by White Label IQ. Tune in every week for insights on how small to midsize agencies are surviving and thriving in today’s market. We’ll show you how to make more money and keep more of what you make. We want to help you build an agency that is sustainable, scalable, and if you want down the road sellable. With 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Drew:

Hey, everybody. Drew McLellan here from Agency Management Institute. This week, coming back to you with a really great episode for the Build A Better Agency podcast. I know that this is going to be an episode that you listen to more than once. I know and I believe so strongly that this topic is underexposed, that we don’t talk about it, that it makes people uncomfortable, but when we ignore or push aside this topic, we put ourselves, we put our agencies, and we put our families at great risk. So I am bringing this to the forefront to you because I know it’s too important for us to ignore, and it’s easy to do.

So before I tell you more about the topic or my guest, I do want to remind you, of course, that at AMI, one of the things that we have going for us is we have this amazing Facebook group of podcast listeners just like you. There’s over a thousand agency owners in there. So all you have to do is go to Facebook and search Build A Better Agency podcast and you’re going to find the group, and it’s a private group. It’s locked down. I’m not letting vendors or other people in there, and you have to answer three questions. Do you own an agency? If so, what’s the URL so I can make sure you actually are an agency owner or an agency leader. You don’t have to be an owner to be in there.

What is the biggest challenge you’re facing that maybe we should talk about in the group, and will you behave? Will you be nice? Will you be kind? Will you be helpful, all of those things? That’s it. Answer those three questions, I’ll let you in. If you don’t answer the questions, I can’t let you in. So head over to Facebook and jump into the conversation. People are sharing resources. They are helping each other find freelancers. They are talking about everything from bonus programs to where they’re finding employees, to new SEO strategies. It’s all being covered in this group. So don’t miss out on it because it’s pretty awesome.

All right. Let me tell you a little bit about my guest and the topic. So my guest is a attorney named Andrea Shoup, and Andrea is an interesting attorney in that she has a depth of expertise in two interwoven topics. One is business law and the other is estate planning. Her premises is, what she teaches her clients is that estate planning is a whole lot more complicated when you own a business and the risks of not doing it at all or the risks of not doing it well are exponential for those of us that own a business.

If you’re listening and you don’t own the agency but you’re at the leadership table, this is a conversation you should bring, too, because the risk passes on to the employees if something happens to the owner and everything’s not taken care of. You may not, even if you want to, you may not be able to keep the agency alive for the surviving spouse or until the agency gets sold or to help everybody keep their job if things aren’t put in proper place.

So this is a super important topic. I hope that it’s not going to be an uncomfortable topic for you, and nobody wants to think about dying, but we all want to think about the people that we love, both at work and in our families, and the causes that we care about and all of the things that we can do with our legacy, and we can’t do any of that without estate planning.

So I’m really excited to bring this topic to you. I think it’s so important and I think by listening and doing some of the things that you learn, you can just avoid so much disaster. I have been executor of several estates. Some have been super simple, some have been a hot mess, and what made them either simple or the hot mess was the level of preparation the person had who died. So I know from personal experience how important this is, and none of those people owned a business. So theirs were the easy ones in comparison. So I want to jump into this topic. I want to introduce Andrea to you, and I want to really get you thinking about what you need to do to protect all the people that you love. Okay? Let’s do it.

Andrea, thanks for coming on this show. I can’t wait to talk to you about this topic because I think it’s important. So thanks for being with us.

Andrea:

Oh, thank you, Drew. I look forward to it.

Drew:

So give everybody a little sense of your background and how you came to have this depth of expertise in estate planning.

Andrea:

Well, when I got into estate planning, I realized that families really have a lot that they need to know, but what I realized is business owners have a whole slew of specific issues and concerns that most estate planning attorneys really don’t get into it because they don’t understand business law. So we really do estate planning business law because there is such a crossover, and just knowing and understanding the specific needs that business owners need to know when thinking of the estate plan, I mean, it’s critical to address all of those concerns.

Drew:

So when you think about all the things that we should know as business owners that influence estate planning, can you give me an example or two of some of the things that most of your clients when they come to you don’t know and you have to educate them about?

Andrea:

I think the biggest thing is understanding what happens to our business when something happens to us, right? I mean, if the last two years have taught us anything, I mean, the unexpected can happen at any time. So if we got unexpectedly sick, even worse, maybe we were sick for extended periods of times or maybe we passed away, well, what happens to our business in that time? Most of us, we do a lot of the business plan and making sure we have our marketing plan and planning for the business while all is well. Well, what happens to the catastrophe plan and the emergency plan? We’ve got to make sure we plan for that and make decisions, not just choices, but make sure that our choices can actually be carried through and followed through if that unexpected event happens.

Drew:

So when most people come to you for estate planning, I’m assuming they’re thinking about, “Okay. I’m going to be retired. I’m going to die someday. Who gets the money and the grandfather clock and the things?” What you’re saying is you have to start with the business side of it. Again, one of the things you just said that I hadn’t really thought about is business planning and estate planning isn’t just about after you’re dead. It could be that you are incapacitated or sick for a period of time and someone has to step into your business. So you would start with a business owner at that point. So okay, let’s think about the … So if you sat down with somebody like me, would you start with me with, “Okay. Let’s figure out the business stuff first, and then the personal stuff”? Is that the plan of attack that you would go through?

Andrea:

They really go hand-in-hand. So we start having a question of, “Okay. Well, what are the ripple effects of any event?” Let’s just say it’s an illness. Okay. So let’s make sure that someone can talk to your doctor. Let’s make sure that your spouse or someone can come in and access the bank account. Well, what about your business? What about your business bank accounts? Who pays payroll tomorrow, right? Who pays your vendors? Who makes sure that the door gets unlocked so your employees can stay still come in? Who is going to do that for you? Now, let’s make sure we have the tools in place so that they can actually do it. It’s one thing when we’re like, “Oh, you know what? Sally, she’s been with me for 10 years. Of course, Sally’s going to do it.” Yeah, well, the bank doesn’t know that Sally’s supposed to do that. Sally’s not doing it.

Drew:

Well, and Sally may not even know, right? You may assume Sally will do it, but Sally may say, “Well, I don’t know what he or she wanted. So I guess we’re just going to stay at home and not go to the office for a couple days or whatever.”

Andrea:

Right. Right. Exactly. Exactly.

Drew:

So as part of the work you do then also talking to the agency owner or the business owner about the conversations they need to have with employees, bankers, lawyers, family, all, because it seems to me that your work would trigger a lot of really important conversations.

Andrea:

It does. It triggers a lot of not just the internal dialogue, trying to figure out, “Okay. Who will do this?” but working out the contingency plan. So maybe it’s Sally. Well, what happens when Sally retires? Well, how do we have a successor to Sally? Making sure that all is not only figured out but implemented in such a way that if Sally’s not here, we got Sally number two as our second.

Drew:

Right. So I would assume that estate planning is more complicated just in terms of the assets and how they’re classified. It’s different to leave somebody a grandfather clock than it is a business. So talk about some of the complications that come with business ownership and estate planning beyond just you have to think about the business and how it’s going to keep going.

Andrea:

I think an example, let me give you an example. So we were working with a company and it was actually a construction company, but the business owner died in 2006 at the height of everything’s booming, construction’s going strong. Everybody’s building a house, right?

Drew:

Yup, yup.

Andrea:

His business was worth, I think it was $4 million, and he didn’t expect to have that heart attack. Well, he did and he passed away, and the probate court, because when we passed away and we don’t have an estate plan, we go through probate court, probate court couldn’t act fast enough. It took over four months to get access to the business bank accounts. Well, what do you think happens in four months? If your employees aren’t getting paid as much as they love you and as committed and dedicated and loyal as they are-

Drew:

Yeah. They have a mortgage.

Andrea:

They have a mortgage. They can’t go four months without a paycheck and still keep working to satisfy your clients. Well, what happens when your clients aren’t getting their work done? They go somewhere else and they start suing your business and they’re not paying you so the business doesn’t have any more money coming in. Well, then what happens if we don’t have any more money coming in? Well, we can’t pay our vendors and so we’re late on our obligations. The whole thing just powers down. It disintegrates. In four months, that construction company, yes, it had the equipment and all the rest of it. That’s all it had after four months. It essentially disintegrated in that time because nobody could step in fast enough. That’s what happens to businesses when it has to go through this probate process.

Drew:

So part of estate planning, so if you have an estate plan, then you don’t have to go through probate?

Andrea:

Exactly. So a properly drafted, properly prepared estate plan can completely avoid that court process, probate process entirely. Now, every state is different. Everybody has their own laws, but every state, every country has a way what happens when someone passes, what happens to their property. There are laws in place and planning ahead means you can avoid going to court, essentially.

Drew:

Yeah. So that’s one complication that comes with owning a business, and I would assume that this is also a highly emotional journey. I mean, nobody wants to think of themselves dying. I can remember when I was working, but everybody probably wants to have a lot of control over what happens. I can remember my attorney saying to me when I was doing my will and my daughter wasn’t an adult yet so I was controlling when she got the money and whatever, and he said, “You can only control so much from the grave, Drew.”

I was like, “Wait a minute. I’m going to control everything from the grave.”

Andrea:

Right. Yeah. It is definitely a very highly emotional, I mean, it creates … Nobody wants to think about … You’re thinking about your daughter. Nobody wants to think about, “What happens if I’m not here?” I got that, but there’s certain things that, I mean, truly just as adults, have to acknowledge, yes, this is not the most fun topic. Now, work with somebody who’s going to help you with it, get in there, address the issues, get it done, and then you don’t have to worry about it anymore, but it is. I mean, it’s definitely emotional. It’s emotionally taxing. It can be, at least.

Usually, I find that people come in a little unsure, a little nervous by 20 minutes into a conversation. They’re like, “Okay. Oh, yeah, this is what I want to happen. Oh, yeah. Okay. Let think about that. All right.” When once we get going, it’s fine.

Drew:

Yeah. So when we are thinking about, to me, an estate plan is not just about building out your stuff, but it’s also about protecting the business, your employees, your family. Talk to me a little bit about our responsibility because I believe a lot of people listening, maybe they have a very simple will that they probably did when their kids were little and they needed to designate who was going to be guardian if they went down in a plane crash or something, but they might not have owned a business then or their kids are now adults and they have grandkids, whatever it is. I don’t think this is something people are all whooped up about updating on a regular basis. So my guess is a lot of people listening either don’t have a will or an estate plan. Well, first of all, talk about the difference between a will and an estate plan, and then let’s talk about the responsibility we have as business owners to do this work.

Andrea:

Right. So an estate plan, really, it’s an umbrella term. Estate planning is making sure someone has legal access to do something, step in when they need to, and they have legal instructions, what must they do, what can’t they do, and they have to be legally enforceable instructions. Okay? Legal access, legal instructions. That’s what an estate plan in general does.

Now, there’s different tools within that umbrella of an estate plan, a will, a trust, a power of attorney, an advanced healthcare directive. They all provide different access and different instructions for different situations. I guess, let’s just think about it from a marketing perspective, right? There’s digital marketing. Okay. Well, that might be the term estate plan, right? Digital marketing. Well, how many different types of digital marketing-

Drew:

Right. Exactly. Yup.

Andrea:

There’s all these different ones in between. Well, so what’s the difference between, I don’t know, SEO and digital marketing? Well, that’s not a difference. It’s just but one part of that umbrella.

Drew:

Aspect. Right. Yeah.

Andrea:

So it’s that same concept with an estate plan is that umbrella, and a will is about what part. That will, actually, and I’m speaking for California specifically, in this moment in California, a will does go through that probate process. In California, a trust avoids that probate process. A properly drafted, properly funded trust will avoid that probate process. I know different states are different. I will say in different states I’ve talked to a lot of estate planning attorneys. I have clients who live in other states. I’ve done estate planning in consideration of other state laws. Sometimes they’re probate process, they’re like, “Oh, well, the probate process is very simple. So it’s okay to go through that process. Maybe it’s a week and a few hundred dollars.” Well, that’s very different in California where it’s two years and sometimes hundreds of thousands of dollars. So in California, we use a trust to avoid that probate process. Does that answer that?

Drew:

Yup. Yup.

Andrea:

Now, as far as I guess our responsibility, I believe as a business owner myself, I have a duty to my family. I got four young kids at home. I have a duty to make sure that I’ve prepared for them. I make sure they have dinner. I make sure they’ve got clean clothes. I make sure they have a place to live right now during my lifetime. Of course, I’m going to be concerned about that if I’m not here, if I’m not going to do it.

Same with my team. They look to me to make sure that I have the clear plan, I know where we’re going and, “Follow me. Let me tell you where I’m going.” Well, I have an obligation to them to make sure that their paycheck keeps going, they have somewhere to be. Well, I believe I have a duty to them if I’m not here as well.

Same with my clients. What we do for families is so vitally important. People ask me all the time, “Well, Andrea, if I get my trust set up with you, what happens if you’re not here?”

I tell them, “You know what? I practice what I preach. I have an estate plan. I have a succession plan. If something happens to me, this firm continues on without me because I designed that succession plan to make sure you’re protected.” As business owners, it’s up to us. We can’t leave it to chance. We can’t leave it to the state to make our decisions for us, and that’s what we do.

What we don’t realize is, “Oh, I don’t have an estate plan.” No, actually you do. It’s the government plan. In California, the fine folks up in Sacramento have made decisions for us.

Drew:

That’s right.

Andrea:

Well, many of us don’t like those decisions that have been made for us. So let’s make sure that we change it so that our company doesn’t disintegrate in four months.

Drew:

Right. Well, and it’s interesting. So I’ve been executor of three estates. My dad passed away in Florida. That probate was a pain-

Andrea:

I’m sorry.

Drew:

That was a pain in the neck. My mom passed away in Iowa. That was a piece of cake. My uncle died with no will, no anything in Tennessee, and that was a hot mess, right? So I totally understand what you’re saying, which is in all of those cases, because they were all prepared at different levels, in all of those cases, whatever they weren’t prepared about, then whatever the governing rules of the state were were what I and the attorney had to work through to get that estate closed.

Andrea:

Well, and you see it firsthand. I mean, you saw it firsthand with three different family members what a mess it can be afterwards. As the executor, you don’t have control. You don’t have the decision making power.

Drew:

No.

Andrea:

It’s gone, sadly.

Drew:

Well, and I think, too, and you’re dealing with all of this at a time when you’re really not at your best, right? I mean, you’re dealing with the loss and the grief and now you’re having to make these huge decisions and understand these complicated laws that … So I think about that part of the responsibility is not only that we’re taking care of our family and our employees, but also that we’re not strapping them with putting them into this quagmire that just adds to the weight of that loss for them in the moment because in some cases, as you said, you can be dealing with this for years and, by the way, it’s time consuming.

Andrea:

Right. Yes.

Drew:

All the documents and all the, I mean, and all the people I had to call to get stuff, and I think, “God!” and both of my parents thought they were well-prepared, right? So which gets me to what does prepared look like. So I want to take a quick break, but then I want to come back and start with … Okay. So let’s say somebody goes, “I got this.” I want them to be able to check some boxes as you talk about, “Yup, I do have that. Yup, I did do that.” So when we come back, let’s talk about what prepared looks like.

Andrea:

Sounds good.

Drew:

Hey, sorry to interrupt, but I wanted to make sure that you are thinking about how to connect with your clients by figuring out what they love and maybe a few things that they’re not so crazy about with your agency. So at AMI, one of the things we offer our client satisfaction surveys, we do both quantitative and qualitative, so an online survey, but also interviews with some of your key clients, and then we come back to you with trends, recommendations, what they love, what they don’t love, lots of insights around how you can create an even tighter relationship with your clients.

So if you have interest in that, you can go under the How We Help tab on the AMI website, and very bottom choice on the How We Help tab is the client satisfaction surveys. You can read more about it, but whether you have us do it or you do it yourself or you hire somebody else, it is really critical that you be talking to your clients about what they love and what they wish was different or better. So do not miss the opportunity to tighten your relationship with your client, whether we help you or not. All right? All right. Let’s get back to the show.

All right. I am back with Andrea and we are talking all things estate planning. Gosh, I hope you guys are taking notes on this because this is, I can tell you from personal experience how important this is, but right before the break, what I said to Andrea was that I’m sure some of you think you’ve done all of this in your set, and I know from my own personal experience with my parents, both of them thought they had done everything they needed to do.

My mom, who never owned a business, who never was a … my mom had it much more dialed in than my dad did, but in both cases, there were things left undone or boxes unchecked that I had to deal with. So Andrea, what, what does done look like for us? How can we rest easy knowing that our estate planning is good and solid, and our people both in the business and our family are well-protected and taken care of?

Andrea:

So from the personal level, making sure that we know what happens in our state, probate, not probate, do we need a trust? If you’re in a state that you need to have a trust in, you got to have a trust. A will just doesn’t do it. So making sure you understand, “Yes, I have.” Let’s say that, yes, you need a trust. Make sure you have it, but make sure all of your assets are now in the trust’s name.

When I talk to people I say, “Listen, for me, my house, it’s no longer in Andrea’s name. It’s Andrea as trustee of Andrea’s trust.” All assets, and I’m saying all, so your bank accounts, make sure that your bank account is titled in the name of your trust. Same with your business. Your business entity has to be titled in the name of the trust. If someone is a sole proprietorship, meaning they don’t have a corporation, they don’t have an LLC or anything like that, there’s no way really to do it. So that’s another thing. Keep in mind you can’t really do it if you just have a sole proprietorship, but if you have an LLC, you have a corporation, make sure that interest is assigned to your trust or you on those ownership documents it says your trust name. If it doesn’t, it’s not in your trust.

I see this all t