May 4, 2026 – Article by Kevin Ellman CFP® and Paul Miller, President.
Illustration by Janet Atkinson
A few years back, a business owner came to see me with a problem. He and his brother owned a utility contracting company. He was “Mr. Outside,” working in the field and supervising crews and job sites, while his brother was “Mr. Inside,” overseeing the administrative side of the business. This arrangement worked well for them. Everything got done, the business thrived, and they stayed out of each other’s way.
Their lawyer had recently advised them to enter into a buy-sell agreement and obtain a life insurance policy to help protect their business. The buy-sell agreement would serve as their succession plan, spelling out exactly what would happen if one of them passed away prematurely or decided to leave the business. The life insurance policy would work in tandem with the agreement and finance any potential buyout for the remaining owner.
The brothers took their attorney’s advice and got started on both items right away. They applied for life insurance, got approved, and began paying the premiums. Meanwhile, a draft of the buy-sell agreement had been prepared, and they were in the process of reviewing it.
The draft called for the life insurance policy to be owned in a trust, with the attorney serving as trustee. But they had not yet gotten around to signing the agreement or the accompanying trust.
Unfortunately, before the brothers could finalize their plan, Mr. Inside passed away unexpectedly. This sudden loss created some complications for Mr. Outside as the surviving business owner.
The insurance benefit was paid out to the attorney as the trustee, as intended. But since there was no signed trust, the money sat in his escrow account. The attorney could not release the funds to Mr. Outside because there was no trust agreement with legally agreed-upon instructions for him to follow.
At the same time, family members wanted to understand what was going to happen next. Mr. Inside’s widow hoped to continue receiving her late husband’s salary so she would have financial support, even though she was not involved in the business. The brothers each had children working in the company, with aspirations of one day stepping in to run things, and they were concerned about how these events might affect their roles. They had ideas for growth and expansion that they wanted to consider implementing. But without a clear succession plan, nobody knew how to proceed or who would take ownership of what.
Understandably, Mr. Outside came into my office visibly frustrated. He now had to manage his own job on top of his late brother’s responsibilities, while also dealing with his sister-in-law’s concerns, questions from his children and nephew about the future, and the fact that his lawyer could not release the insurance proceeds. The business was suffering, the family was in conflict, and there was still no clear path forward.
A Cautionary Tale
Even though Mr. Outside and his brother were on the “one-yard line,” with a draft of the buy-sell agreement and a life insurance policy in place, the plan was effectively void because it wasn’t signed. The process had been poorly coordinated and, in the end, there were no safeguards in place to protect the family or the business when the unexpected happened.
It took years, plus millions of dollars in legal fees and lost revenue, before the succession issues were finally resolved. By that time, the business had declined and the family’s relationships had been permanently strained.
Plan for the Future Now
It’s easy to think these situations won’t happen or that succession planning can be put off for a few more years, but it’s also worth considering that an incomplete plan is worse than no plan. It’s generally wise to prepare for the worst, so it’s easier to handle if and when it happens.
Learn about the Succession Planning Process at Wealth Preservation Solutions.