Recently the Charlotte Business Journal contained an article about the big banks’ failure on their own ‘living wills’. In the context of the big banks, the living wills in question are the Federal Reserve and FDIC requirements that the largest banks provide documents outlining how the bank’s failure or bankruptcy will not create mayhem in the economy, as was the case when Lehman Brothers failed in 2008. In short the Federal Reserve and FDIC determined that the banks’ current living wills were insufficient.
While the content of the largest US banks’ living wills is not likely on most of our minds, the rationale for having these so-called living wills can be applied to our personal lives, and also for our own small business purposes. Simply put our own ‘living wills’ can set forth what should happen if we fail (death) or our business fails.
Individual Living Wills
On the personal side, the need for a living will cannot be understated. Living wills, also known as advance directives, are estate planning documents that outline an individual’s wishes, instructions and directions when faced with end-of-life situations. Often utilized in conjunction with health care powers of attorney, living wills allow individuals to express what kind of life-prolonging care they wish to receive when faced end of life circumstances. End-of-life situations can be traumatic for those who must make the tough decisions associated with life-prolonging care. Living wills allow individual to express their own wishes, while not facing or experiencing those situations. Discussing, thinking about and stating what you would want to happen if you were in the final stages of cancer or comatose while you are still healthy and with full mental capacity allows you to give significant thought to how the final days or hours of your life should play out. Putting a living will in place avoids the disruption, confusion and possible discord that can arise when facing those situations without one.
Living wills should not be confused with ‘last wills and testaments’ or ‘living trusts’ which both generally describe who should receive our property at our death or in other circumstances. That said, the benefit of any form of estate planning is the ability to make your own choices as you see fit, not to be forced to follow the instructions of the State or medical providers. You have the ability to make your own decisions, but only if you make and document your choices.
Business Living Wills
On the business, we often see such ‘living wills’ not in the context of avoiding a national mayhem because of business failure or bankruptcy, but instead the chaos that can be wreaked on a small business when an owner or key employee dies, becomes disabled, divorces, files bankruptcy, or simply wants out. In those situations, a business living will or formal succession plan can provide a measure of administrative and economic efficiency by outlining the process and terms by which ownership is transferred, the business is sold, or the company is wound down. Shareholder agreements, buy-sell agreements, and other contractual arrangements can be put in place to avoid the mayhem of business failure, whether brought on by personal matters (death of an owner, employee) or economic (the business simply isn’t performing as expected). Once again, the ability to establish terms the parties can agree to is available; but only by prospective planning for the unexpected.
Whether they are termed living wills, advance directives, or buy-sell agreements, an individual and business owner has the ability to plan for the future. While the big banks must satisfy the demands of the Federal Reserve and FDIC, individuals and business owners need only be concerned with satisfying themselves and their partners in developing appropriate plans for the future. Estate and business planning attorneys can provide that assistance; if you have questions about your personal or business plans, contact an estate planning and business planning attorney today. Your family and business partners will thank you.
To learn more about living wills for individuals and business contact one of our attorneys via phone or our contact us form