Estate & Succession Planning A Must For Bajan Families & Small Businesses

Lack of knowledge about how accounts are managed following the death of a loved one, is leaving too many Barbadian families desperately waiting for much needed funds and negatively impacting small, family-owned businesses. While speaking recently at the Barbados Association of Insurance and Financial Advisors’ (BARAIFA) online seminar on “Treasuring the Family Jewels”, Republic Bank’s Manager, Legal Services, Kyesha Applewhaite, surprised some attendees with information on what happens to a person’s individual account following their death.

In an interview following the event she noted: “I see estate planning as making appropriate plans to manage both your assets and liabilities. You look at the whole picture first then you try to minimize the liabilities, minimize the burden that is going to your estate and then you deal with your assets,” she said.

INDIVIDUAL ACCOUNTS
Applewhaite explained that while people are aware that they should leave a will, it is evident that they are not always aware of the practical steps they need to take to ensure that the right persons can access the money in their bank accounts upon their death.

She said people are often surprised to learn that individual accounts are frozen after the bank is informed of someone’s death.

“Nothing is going to come in, nothing goes out and the only way to access monies in that account is for a Personal Representative — an executor if you have a will or an administrator if you do not have a will, to be appointed by the court — to do so. The problem is that the process of appointing a Personal Representative can take up to a year. Now, if you could get a Personal Representative appointed in two weeks, it would not be as big an issue but when your account is frozen for a year, it causes all sorts of upheaval,” she explained.

That could mean, for instance, that following your death, the relative who takes care of your children might not have access to the money you left behind for those children for up to a year.

SMALL BUSINESSES & SUCCESSION PLANNING
When it comes to small businesses she explained, “Unfortunately, I don’t see a lot of succession planning and that is definitely a big weakness with a lot of small businesses. When you have a business and you are the only signatory on the account and then you die, that business could suffer as well,” she said frankly.

Applewhaite lamented that, too often, people think that if they name someone as a beneficiary in their will, that their assets will automatically go to that person. However, she says they fail to consider other critical details involving the management of their accounts.

“Consider this situation where these two parents had a business. Their son was mentioned in the will, he was being groomed to take over the business, he knew the suppliers and so on. Then, the parents died in short order but the son was not a signatory to the business account. So all those funds in the business account were locked away from him but he still had to run the business. He had to take out a loan to run the business. Thankfully, he qualified for the loan but there are many instances where people do not and that means the business will suffer,” she said.

Succession planning is integral to the success of small businesses and she stressed that it involves more than simply having an idea of who you want to inherit your business.

“For instance, a big part of a bank deciding whether you get a loan, and the terms on which that loan will be given, involves looking at the expertise, skill and experience of the key persons behind that business. If you die and your successor is found to be someone who has never operated within the business, the suppliers don’t know them, customers don’t know them, and the Bank doesn’t know them, then when it comes time to do that annual review of the business, your successor might not get the same sort of facilities being extended to the business anymore. Those facilities might not continue at all or may not continue with the same sort of interest rates that the business enjoyed before. So succession planning is more than just picking someone in your mind and saying, ‘well, yuh know, in my will, I will leave this to this person’. That person has to really be groomed to take over the business for it to remain viable and successful,” she said.

FAMILY CONTINUITY PLANNING
When it comes to estate planning and managing family finances, Applewhaite says there is one practice she believes Barbadian families can adopt from big business.

“Businesses have business continuity plans. So we visualize that a disaster has hit — what’s going to happen in 24 or 48 hours. And I really think that families should have a ‘family continuity plan’ where you sit down and you imagine ‘ok, I’ve died today. My spouse needs to put gas in the car- what money does he have? Does he have access to money? Does he even know what bills are being paid? Or is it a situation where, because I’ve taken control of everything, he knows we have an insurance policy and we need some property insurance, but he doesn’t actually know the amounts. So will he be on tenterhooks for the next 30 days trying to figure out what bills are going to be coming in? Families need to visualize these kinds of practical things and figure out if they have access to all of the kinds of information needed to manage those situations,” she said.

While banks are not in the business of giving financial advice, Applewhaite believes good financial decisions regarding your estate should start with speaking to financial advisors.

“Sometimes you get caught up in doing these kinds of checklists. You say, ‘ok, I have a will, or I have $500,000 in my bank account so my family will be taken care of’ but practically, when you die, people don’t know what’s happening, they don’t have access to the information or the accounts and things are really not as smooth as it could be. The sooner we normalize Barbadian families getting into the habit of estate planning and making informed decisions with help from professional financial advisors, the better off family units and family businesses will be following the death of a loved one,” she said.