Death and Taxes

I’ve often heard two things in life are certain: death and taxes. Taxes, for a tax or accounting professional, are usually a very good thing. Death, on the other hand, is not so good and, without proper planning, can be very bad.

Some time ago, we had a call from a CPA interested in selling his practice. He mentioned that he was ill and would not be able to work much longer. He wanted our help selling his practice.  However, he kept pushing aside our paperwork and focused on taking care of other issues in his life. He mentioned to his wife that he had contacted us about selling, but did not involve her in any planning. When he passed away a few months after our initial conversation, he had never finished the paperwork we required to market his practice for sale.  He also did not leave any instructions for his wife.

Months later his widow contacted us to get the practice listed for sale.  Unfortunately, it was too late.  Most of the clients, who knew of the CPA’s illness and death, had already found other suitable accountants.  As a result, his wife and family received zero proceeds from the practice.

If you die without developing some form of practice continuation plan, your family is at risk of receiving nothing for your business.  Having a plan should enable your family to insure the continuation of practice through an internal buyout with an employee or partner or an external sale.  Whether you draft a plan or not, your family or estate will need to move very quickly.  Word travels fast and within a matter of weeks the value of your practice can decrease dramatically.

To help your family address the issues surrounding the transfer of your practice in your absence, we recommend you write a letter to be opened upon your untimely death.  The unexpected loss of you and your earnings will be hardship enough and handling the details of your business will likely be overwhelming to your family.  Help them profit from your years of hard work by documenting your plan and providing instructions for them to follow.

We are available anytime to discuss this or any concerns you may have.  It may be too early to begin a transaction, but it is never too early to begin planning.