What Do You Do When the Senior Generation has Alzheimer’s?

What should you do as a consultant when you discover that the senior generation is in the beginning stages of Alzheimer’s and there’s no succession or estate plan?

Business Leader Post, April 16, 2012

Thomas D. Davidow, Ed.D.

The common model for developing a succession and/or estate plan involves focusing on the emotional issues that have interfered with the lack of a plan, developing a plan that transfers authority and responsibility over time, creating other business structures as necessary and helping the family improve their communications, etc. However, when the senior generation is suddenly faced with a debilitating health issue, the model of a gradual succession process is no longer feasible. Time is now your enemy instead of your friend. You need to work quickly and efficiently, and you have to get creative.

A family whose senior member was diagnosed with Alzheimer’s agreed to the following protocol:

Before the protocol can begin, two conditions have to be met. First, the senior generation has to acknowledge they are ill and that they have a limited time to make the major decisions that the process will entail. Secondly, the next generation will probably have emotional issues as well, including resentment that no plan has been developed until now, and that the present dilemma demands that a plan be developed very quickly. This time limited engagement will not allow for those emotions to be addressed. In addition, given the illness of the senior generation, it would not be appropriate to express those emotions in this process. The next generation, therefore, will need to address those issues with a therapist.

The family also has to address its preference. All things considered, do both generations believe it is best to have the business continue into the next generation? Assuming the answer is yes, you need a financial advisor, lawyer or accountant to review the financial status of the senior generation and the business to determine whether the numbers can work. The criteria are the financial welfare of the senior generation and the maintenance of its life style. That is a 30 day process.

The father and son in this family agreed that they would both have input. Either one has the power to say no and stop the process. Once both generations determine that the numbers work, they need to negotiate the transfer of management responsibilities and authority in a way that both believe, if implemented well, would allow the business to continue its success. If they cannot agree, then the process stops and the business will be sold.

The next step is to implement the plan. That includes the buy in of other key employees over a three month period. After three months, both generations evaluate the progress and determine/agree that there is sufficient evidence that they are moving in the right direction. If not, the business is sold.

If both generations believe that they are moving in the right direction, you bring in the estate planning attorney to create the documents—with the input of the financials, including the criteria mentioned above—that will transfer the ownership to the next generation in the most tax friendly way.

This process is quick, less expensive and can provide a lot of stress relief.