You can be on Entrepreneur’s cover!

4 Lessons on Succession Planning for Entrepreneurs In honor of National Life Insurance Month, a quick primer on what you should be doing now.

By Rahkim Sabree

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

millann | Getty Images

When it comes to long-term planning scenarios for entrepreneurs, the eventual goal is to be able to draw an income without working. That could happen in your 60s, as is typical, or it could happen earlier if you're a millennial who embraces the popular F.I.R.E. (Financial Independence Retire Early) movement, which prioritizes limiting expenses and maximizing saving and investing. Whether you're doing that or embracing traditional approaches to retirement planning, the bottom line is you're thinking about retirement. But something you might not be thinking about and should be? Death and succession planning. Here are four lessons on succession planning for entrepreneurs.

Related: 5 Excuses For Not Paying Yourself First -- And Why They're Wrong

Discuss financial decisions

When you start thinking about succession planning, you should have an idea of who your beneficiary might be. In some cases that'll be a partner or spouse, or the mantle might rest with children or extended family. Even if you handle financial decision-making completely, it's important to discuss the logic behind those decisions so that your beneficiary understands your patterns. You save a certain percentage of your income? Communicate or document why. You split up your income across multiple accounts? Communicate or document why. You want to make a big purchase or take a vacation? Communicate or document why. This is especially important in situations where your business' income is what primarily supports your beneficiary. Communicating the "why" behind financial decisions helps to establish an awareness and a cadence so that when you are no longer the driver, your heirs or beneficiaries can take over without missing a beat.

At a minimum, create a will

Your will can help to establish the flow of your assets as well as make said assets easy to locate and identify. Maybe you had an emergency account somewhere that no one else knew about, or maybe you maintained separate accounts solely in your name. A will should have a list of banks you bank at, account types and even balances so that your beneficiary isn't looking for a needle in a haystack. Your will can be as detailed or basic as you desire, but at a minimum it should state your wishes and intended beneficiaries. You should regularly review and discuss the details of your will with your chosen beneficiary.

Related: How to Plan for Succession When There's No One to Succeed You

Establish co-ownership or power of attorney

Each designation comes with similar but very different benefits. Assigning your beneficiary as co-owner or managing member allows them to make decisions as if they were you, completely independent of you, with all the same rights and privileges. As POA, your beneficiary will have similar rights to transactions and balances but some limitations. They'll need to prove their status as power of attorney and usually will step up to make decisions in the event of your incapacitation. A major point to note with power of attorney is that the authority granted is limited to your lifetime, meaning once you die the power of attorney becomes useless. Co-owner status will grant your beneficiary rights of survivorship in the case of personal bank accounts and allow them to continue to access balances and transactions after you are no longer here.

Related: What Chadwick Boseman's Life Can Teach Us About Being Leaders

Take out a life insurance policy

Death is a taboo topic that nobody wants to talk about, especially when you're talking about yourself. Like personal finances in general, people tend to bury their heads in the sand with an out-of-sight, out-of-mind mentality. This is a mistake, as death is an eventuality. There are a variety of insurance plans to choose from, and a qualified life insurance specialist will be able to help in selecting the best policy to cover the costs associated with your death and continued support for your beneficiaries as they navigate the grieving process. Spontaneous GoFundMe campaigns are not an acceptable replacement for coverage, regardless of the amount they raise. There are various formulas that can determine what sufficient coverage looks like for you, whether that means covering debt, replacing your income or simply covering your funeral arrangements. Structured carefully, a life insurance policy is the ultimate life hack for generational wealth building.

In short, communication with your intended beneficiary means everyone is on the same page about collective financial goals in the event of your demise. Whether they're directly supported by your business or not, your heir should be versed in what to do and how to do it when you are no longer present.

Related: 5 Factors for Planning Your Entrepreneurial Legacy

Rahkim Sabree

Financial Empowerment Coach

Rahkim Sabree is the author of "Financially Irresponsible" and is a certified financial-education instructor and financial coach passionate about all things personal finance.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Side Hustle

He Took His Side Hustle Full-Time After Being Laid Off From Meta in 2023 — Now He Earns About $200,000 a Year: 'Sweet, Sweet Irony'

When Scott Goodfriend moved from Los Angeles to New York City, he became "obsessed" with the city's culinary offerings — and saw a business opportunity.

Marketing

I Got Over 225,000 Views in Just 3 Months With Short-Form Video — Here's Why It's the New Era of Marketing

Thanks to our new short-form video content strategy, we've amassed over 225,000 video views in just three months. Learn how to increase brand awareness through short-form video content.

Branding

94% of Customers Say a Bad Review Made Them Avoid Buying From a Brand. Try These 4 Techniques to Protect Your Brand Reputation.

Maintaining a good reputation is key for any business today. With so many people's lives and shopping happening online, what is said about a company on the internet can greatly influence its success.

Personal Finance

How to Get a Lifetime of Investing Experience in Only One Year

Plus, how day traders can learn a lesson from pilots.

Productivity

6 Habits That Help Successful People Maximize Their Time

There aren't enough hours in the day, but these tips will make them feel slightly more productive.

Growing a Business

Looking to Achieve Your Goals But Don't Know Where to Start? Try These Proven Goal-Setting Strategies.

Find a more effective way of creating – and achieving – your goals. Get clear on your vision, make your plan, take action, reassess and then revise.