What can happen without a succession plan

By Allan T. Mendels, CLU, ChFC

At 63 years of age Jerry was, in his own words, “living the dream.” He worked six months to qualify for MDRT, then spent the rest of the year touring the country with his championship senior softball team. He enjoyed the freedom and flexibility this profession promises to everyone who succeeds. Jerry died suddenly one Friday morning with no agreement and no successor.

When his eldest daughter called the company to find out where to go to sell Jerry’s business, she found out the company would pay vested renewals and pending first-year commissions to Jerry’s estate. All other cash flow to Jerry’s practice ended at midnight on the day he died. By dying without an agreement in place, the cash flow to his family from his practice was lost. His daughter also learned that without being licensed or contracted with the company, she was not in a position to offer Jerry’s business for sale. By contract, all of his clients reverted back to the insurance company as orphan policyholders.

Complicating things further, Jerry’s staff had worked diligently to take good care of his clients for the weeks immediately after his death. At the end of the third week, the staff called the company looking for their last two paychecks. The response they received was to contact the daughter, who had just learned Jerry’s business was worth, at best, about 10 cents for every dollar Jerry earned prior to his death.

His three children never wanted to enter Jerry’s business because they “didn’t want to work as hard as Dad did.” Now, the children lacked the value of the practice, had the financial debt of the staff and the emotional (and probably legal) obligation to make sure it was paid. Both problems could have been avoided with some planning.

Read about another Jerry learning the importance of succession planning in “The two Jerrys.”

Mendels is a 46-year MDRT member from Roslyn, New York.