Planning Must Consider the Unforeseen Future, Not Just the Present

It may seem obvious, but it is critical for all of your long-term planning, from an inheritance to a business succession strategy, to take into account potential events that have yet to happen. Far too many New Yorkers engage in estate planning and financial planning that gives short shrift to potential changes in circumstance in the future. It is worth reiterating that all families should make plans that take into account unknown future events, like divorce, disability, a lost job, and more.

Divorce, Disability, and More
A Financial Advisor magazine article from late last month touched on the principle of long-term forecasting. The story is focused specifically on business succession planning, but the basic principles are applicable to many forms of long-term preparations. The story summarizes the potential unknowns as the “Four Ds” — divorce, disability, drugs, and death.

In the business succession context, this refers to dealing with changing marital status of an owner (and the resulting property rights dispute), death and disability of a partner, or potential drug/addiction problems of a key business employee. Steps must be in place to deal with these events so that the business is not decimated in the aftermath. The business graveyard is filled with many family enterprises that fall apart when uncertain events occur that paralyze decision makers and throw the business entity into chaos.

The principles of preparing for these (and other) unknown events applies well beyond business succession planning. Consider crafting an inheritance. Is it satisfactory merely to consider what the family is like now or is it prudent to factor in unique life events? Obviously the latter is necessary.

But it is natural wonder if anything actually can be done to prepare for a future that is unknown. How do you prepare for a divorce that may not happen, a drug addiction that has not occurred, or a disability that hopefully will never happen? The answer is to use flexible legal tools–like trusts–and to make contingency plans.

An estate planner can discuss the specific types of trusts and/or property ownership arrangements that might provide the most protection in case of some future change in circumstance. Similarly, the professional can also provide advice on what other events should be accounted for and considered when crafting these plans. Half of the battle is often thinking about contingencies early on, instead of lamenting later, “Oh, I should have thought of that.”