A state of momentary confusion typically engulfs a loved one when notified that their husband or wife has just been in a serious accident or passed away. The atmosphere is often charged with high emotion. Suddenly the world as the surviving spouse has known it is turned upside down. Soon life-altering decisions will have to be made, especially when a family business is involved.

Consider the story of Amanda whose husband Tory was hit by a drunken driver while riding his motorcycle. Even though she had worked in their business, she was totally unprepared to replace Tory as its principal operator.

It was apparent that the business would soon unravel with no one controlling the company. Amanda quickly found that Tory's Will and life insurance were of little help. Each would apply only in the event of his death. Instead Tory's Durable Power of Attorney appointed Amanda as his Personal Representative to conduct business under specific conditions that included his being incapacitated.

The family's financial future depended on her working in his place. Somehow she, with the employees, had to keep the business operating. Her management style could be described as crisis control through trial and error as she learned from daily mistakes. There was no planning to assist her in running the business, only the legal temporary transfer of authority provided by the power of attorney.

A major fear of many spouses is "what happens to them and their families if their husband or wife who is the principal operator of a company becomes unable to operate a small company owned by the family?" The answer depends on many things, depending on what planning and preparation has been accomplished before a triggering event occurs. If there has been no planning, then the fate of the business falls to state statues which direct the appointment of the disabled owner's Personal Representative. The ability to control management of the company can transfer with the appointment. There is no guarantee that a family member will be appointed to that position. A family's future interest in the business remains in peril depending on the appointee's success.

An adequately prepared spouse can be the golden key to a business's survival. Their designation as Personal Representative in either a Durable Power of Attorney or a Will gives them authority to represent an owner's interest in a company. If the owner controlled the fate of their business, then their spouse can automatically succeed to that position unless limitations have been made in the estate planning documents. Thus the ultimate fate of the company depends on the successor spouse's decisions. In many instances however, the successor spouse has been placed in their position as successor as a means of convenience; it never being expected that they will have to operate the family business. Little thought has been given to their qualification or ability to handle the burden suddenly placed on them.

Every spouse needs to have some type of organized action plan just in case they have to assume control. A prepared spouse is aware of their options for running a business before a triggering event occurs. Their options include:

· Continue to personally operate the business

· Operate the business as an overseer, not involved in daily operations

· Elevate a designated employee to be chief operating officer

· Hire a temporary experienced manager

· Sell all or part of the business as soon as possible

· Exercise an operating, purchase, or buy-sell agreement

Selection of the appropriate choice depends on many factors. Chief among the considerations is the length of time anticipated for the successor spouse's involvement. Will the spouse's participation be short-term until the affected owner recovers from the triggering event? If so, how long should the company be operated with temporary leadership before a decision is made to implement a permanent succession plan? And, will a permanent succession plan mean different ownership and/or management?

In some cases the successor spouse may qualify to represent the owner interest but not have the necessary license and education to operate the company. If necessary, a qualified manager having the necessary qualifications can be hired.

The potential successor needs to develop their action plan based on:

· Their:

o Management ability

o Availability

o Motivation

o Operating knowledge of the company

· The company's:

o Type of legal entity

o Size

o Number of employees (their knowledge and experience)

o Diversification of management

o Diversification of product or services

All businesses are not created equally. Entitlements and protections vary under state statues according to how a business was legally structured when it started operation. For instance, ownership interest of a company started and continually operated as a sole proprietorship ends when the owner can no longer participate in its activity. Companies created and operated as a corporation, partnership or as a limited liability type of either have owner interests to transfer.

The development of a successor spouse's action plan starts by their educating them self through dinner table discussions and reading trade magazines. The education should be broad in scope so options are understood. Detailed operating knowledge of company operations is not required because businesses change daily in response to demands. Instead you need to prepare yourself to make crisis decisions.

Consider what would be your first steps in implementing your action plan. Different triggering events require different responses. Before any options are exercised, the first step of an action plan should be to gather all available information about the company. Confidential disclosures, useful short cuts, administrative information, operating mechanics, guidelines and overviews detailed in an operating plan prepared by the operating spouse would be valuable aids in decision-making. The use of a suggested trusted advisor could be of tremendous importance for support and guidance. From whom and how a spouse obtains assistance should be part of an operating plan document.

A prepared spouse with an action plan can hold the golden key that makes the difference for a business's continued operation and a family avoiding unnecessary financial crisis when unfortunate events strike.

About the Author: Dick Yemm is an author, speaker and consultant on succession planning. His award-winning book, "The Stories," was developed as part of the series Tomorrow - Your Business Without You. They are used in his seminars on contingency/succession planning for business owners and their families. Dick is a professionally licensed Certified Financial Planner™ and holds multiple levels of security licenses. For more information please call 772-562-1281, email rileyspress@atlantic.net or visit www.yourbusinesswithoutyou.com.